Election 2020: Who is Best for Your Stocks?

election outcome

Today is Election Day, so if you haven’t voted yet, please do. As an investor,  you may have a big question on your mind about the election outcome:

Are Democrats or Republicans better for my money?

Let’s look at some data. Since 1900, $10,000 invested in the Dow Jones Industrial Average only when Republicans were president would have grown at a 4% annualized rate. The same $10,000 would have grown at an annualized 6.1% rate if the money were only invested when Democrats held the office of the presidency.

For comparison, if $10,000 was invested in 1900, and remained invested regardless of presidential political party, it would be worth more than $4.3 million today, an annualized return of 5.2%.

So, on the surface, it looks like the Democrats are better for the stock market in the election outcome.

But let’s flip this around. I prefer to look at the question in the opposite direction.

How do the economy and markets affect the election outcome of presidential races?

Since 1900, there have been 14 presidential election years during which there was an economic recession or a stock bear market (a drop of 20% or more), or both.

In nine of those cases, the incumbent president lost his bid for reelection.

Let’s narrow our focus to only the period from the 1950s to today. Six presidential elections have been accompanied by a either a recession or a bear market or both.

In every case, the incumbent president lost his bid to remain in office.

Let’s now look at what has happened during healthier economic times and bull markets.

There were 16 election years in which there was neither a recession nor a bear market in stocks. In these years, the incumbent president won 13 times, while only losing three times. 

Of course, 2020 may be the strangest year ever. We do have an ongoing economic recession caused by the pandemic. But the Federal Reserve has kept the bull market in stocks going.

We will have to wait and see if it is the economy or the market that exerts the greatest influence on voters.

On a historical note, the midterm election in 1918 took place in the midst of a pandemic. Voters opted for change. They flipped both chambers of Congress in favor of the opposition at the time, the Republican Party.

The Big News

The Pandemic Worsens

The current wave of the virus continues to grow worse here in the U.S. The number of new cases over the past week has hit a new high. The daily average is more than 85,000 cases. The story is similar around the globe. The seven-day moving average of global coronavirus infections exceeds 500,000 cases for the first time. Total cases have reached 46.9 million.

Trump Alarms Scientists Again

An Oct. 21 executive order issued by President Trump has sparked fear among government scientists. The order creates a job category for government workers in “confidential, policy-determining, policy-making, or policy-advocating” roles. The Trump administration described the order as a way to remove poorly performing employees from their jobs. Researchers fear that it could make firing scientists and hiring replacements for political reasons easier.       

Clorox Cleans Up

As coronavirus cases surge, people keep reaching for disinfectants. Profit at Clorox doubled in the third quarter to $415 million. Sales soared by 27%. The company enjoyed double-digit growth at eight of its 10 divisions.  Clorox said it was having a hard time keeping up with demand for disinfectants.

Birx Sounds a Warning

A top U.S. health official warns of a new and “deadly phase” of the pandemic. Dr. Deborah Birx is the response coordinator for the almost-forgotten White House coronavirus task force. In an internal memo, she said officials were too focused on preventing lockdowns, not stopping Covid-19.

Pregnant Women at Higher Risk From Covid

The CDC added pregnancy to the list of conditions that put people with Covid at higher risk. The CDC study examined the outcomes of 409,462 symptomatic women ages 15 to 44 who tested positive for the coronavirus. Some 23,434 of the women were pregnant. The study found they were significantly more likely to need intensive care, to be connected to a specialized heart-lung bypass machine, and to require mechanical ventilation than non-pregnant women of the same age who had Covid-19 symptoms. The pregnant women faced a 70% increased risk of death when compared to non-pregnant women who were symptomatic.     

The Coronavirus Numbers

Here are the numbers from Tuesday at 8 a.m. ET from Johns Hopkins University:

  • 46,972,539 Infected Worldwide
  • 1,207,975 Deaths
  • 9,293,310 Infected in the U.S.
  • 231,566 Deaths in the U.S.

Airbnb Confidential IPO: Sources Reveal Private Details

Reuters reports that Airbnb plans to IPO in a $31 BILLION deal. Yet the secretive Silicon Valley tech stock is keeping everything 100% private. My urgent briefing reveals little-known details on the biggest IPO of 2020. Click here ASAP for urgent details.

What’s Next

Stock markets here in the US and globally braced for the election with a strong showing on Monday. Stocks recovered ground after last week’s drubbing. They are extending gains this morning.

There is a strong bid for risk at the moment. The mentality right now is to “buy the dip” ahead of the election . . . no matter what the virus does.

Is this greater confidence about a clean win by either candidate? Or simply a bit of buying on oversold conditions from last week’s decline?

It’s hard to say – the election outcome looms and volatility is expected as results come through this evening.

Certainly, a clean election outcome on tonight is what markets are hoping for – whether it’s Biden or Trump.

Of course, despite the positive mood, investors still have a healthy degree of nervousness. This is all centered around the prospect for a disputed election result.

The CBOE Volatility Index, or VIX, which measures expected volatility in stocks, was close to 36 today. That compares to its long-run average of 20.   

We may have a short period of uncertainty and volatility. But the long-term trend remains up for now.

Meanwhile, this urgent briefing reveals little-known details on the biggest IPO of 2020. Click here ASAP for urgent details.

Yours in Health & Wealth,

Tony Daltorio

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