Stocks increased most of the week as optimism grew over a second stimulus package being negotiated within Congress and the White House. That optimism faded slightly as escalating tensions between the U.S. and China caused a selloff in technology firms on Friday, and stimulus negotiations hit a stalemate between parties. President Trump claimed he would take action on his own if the two sides could not reach a stimulus agreement by Friday.
S&P 500: 3,351 (+2.5%)
FTSE All-World ex-US (VEU): (+2.2%)
US 10 Year Treasury Yield: 0.57% (+0.02%)
Gold: $2,031 (+2.8%)
EUR/USD: $1.179 (-0.5%)
- Monday – Factory production increased in July across the U.S., Europe and parts of Asia, but overall export orders were weak, according to an IHS Markit survey.
- Tuesday – A massive explosion erupted in Beirut, the capital of Lebanon, after an apparent warehouse fire ignited explosive materials being stored there.
- Tuesday – Ford announced that COO Jim Farley will succeed Jim Hackett as the new CEO starting October 1st.
- Tuesday – Argentina reached an agreement with creditors to restructure approximately $65 billion in outstanding debt.
- Wednesday – Facebook’s Instagram launched a competing service to the popular TikTok video app, called Reels.
- Thursday – President Trump signed two executive orders designed to limit the use of Chinese social-media apps TikTok and WeChat.
- Thursday – Weekly jobless claims fell to 1.2 million, a lower level than expected.
- Friday – The U.S. Labor Department reported 1.8 million jobs were added in July, dropping the unemployment rate to 10.2%.
- Friday – Virus-related stimulus negotiations hit a roadblock when Treasury Secretary Steven Mnuchin flatly rejected the Democrats offer to scale back their original package by $1 trillion.
Our Take: How Do Elections Impact the Market?
The 2020 U.S. Presidential election is now less than 90 days away, and with COVID still surging across the country we believe it will be predominately mail-in. But the countdown has renewed fears amongst investors as to the election’s potential impact on financial markets—a concern that tends to pop up once every four years. So what can we expect? A quick look at the data provides some interesting insights.
Many people think a Republican winning the election is best for markets, since they would theoretically be more “business friendly”. But is this actually true? As the table below suggests, historically this has only been true for the election year, whereas Democrats appear to post better returns during their first year in office. We believe one potential explanation is that markets get excited when Republicans are elected, but if nothing dramatically changes that excitement fades. The opposite could be said about a Democrat being elected. Markets appear to be more cautious directly following their election, but grow increasingly enthusiastic when nothing dramatically changes.
|Party of President Elected||Election Year||First Year|
It’s also interesting that Democrats have generally posted better annualized returns during their terms in office going all the way back to 1945. But the strongest annualized return for a single sitting President? That title belongs to Republican Gerald Ford with his two years stretching 1975 to 1976 (only counting full calendar years). The full data can be found below.
What does this all mean? Elections are often polarizing and emotional, and each party tends to think the world will come crashing down if the opposition wins. But the reality is very little tends to change. And regardless of which party wins, returns tend to be positive in both the election year and first year in office. Said another way, it’s okay to care about politics, but we believe it’s best to not let presidential elections influence your investment decisions.
|Party of President||Average Annualized Return|
|Democrat is President||14.3%|
|Republican is President||9.0%|
*S&P 500 Total Return – Calendar Years of Presidency