We all want to know: How will this year’s election affect me? How will the results influence the stock market? Many factors can impact the stock market, but most people want to know how the election specifically will affect it. No one can predict exactly what will happen this year, but we can look back at what has occurred in the past and see the positive results the election has had on the stock market. Traditionally, if the president is up for re-election, stocks do well.
There have been 23 elections since the S&P 500 Index began. During these election years:
19 of the 23 years (83%) provided positive performance
When a Republican was in office and a Republican was elected (or re-elected), the total return for the year averaged 11.9%.
When a Republican was in office and a Democrat was elected, the total return for the year averaged -2.6%.
You might also be wondering, “What about taxes?” How will the election affect our taxes moving forward? If Joe Biden wins, he has proposed increasing taxes for anyone earning more than $400,000 a year, and the possibility for more regulation. Biden’s tax plan will raise taxes for corporations and wealthy households in hopes of increasing the federal reserve by a projected $4 trillion over the next decade. Check out “Unpacking Joe Biden’s tax plan” on our website for more details.
Now, if Donald Trump wins, he has not proposed increasing taxes or regulation. Typically, he has pushed for lower taxes. Strategists note that historically a strong three months in the S&P 500 before an election has turned out well for the incumbent party. Given the strength of stocks recently, this may bode well for Trump, suggesting polls could be even tighter than we think. On the other hand, a recession occurring before an election has ended hopes for previous presidents.
Thus, we shall see in the next few days what direction we will move in for both the stock market and our taxes. Call us at (301) 733-7777, or visit our “Election Resources” page on our website for more information.
Sources:
· LPL Research, FactSet 9/18/20.
· First Trust
· Nationwide