Some Interesting observations on the impact of US Presidents on the US Markets

We’ve all now heard the result of the election. Given the polls just before election day, the outcome was a surprise, to say the least. The result has been compared to Brexit, which was one that was similarly surprising.

Perhaps we are less sceptical. Living in the world of financial markets, we know that probability is only ever as the name suggests. It represents the likelihood of something occurring, and is a very different word to certainty.

Markets have adjusted quickly since the election result, as reality set in. Initially, it appeared as if markets would go down. However, since the election result, as at the time of writing, the S&P 500 is up 1.2%, the Nikkei up 2.9%, the CAC 40 up 0.7%, the S&P/NZX 50 up 1.1% and the S&P/ASX 200 is up 3.7%.

All this means is, ironically, that investors don’t know what this means. Will the American business community or Congress rein Trump in, or will he be allowed to follow through on his election campaign promises? Trump won’t be able to pass law by himself, but he will be able to block trade deals (such as the TPPA), for example. Many New Zealanders that are anti-TPPA would also be very anti-Trump, and yet he’s very likely to kill the deal that they didn’t like. It shows how complicated this election really has been.

From the perspective of an investor, it’s interesting to look at the relationship between the US President’s political party and investment returns. Historically, markets have done better when a Democrat is President rather than a Republican (9.7% growth as compared to 6.7%). However, the same data shows the markets do best when the Republicans have controlled both the House of Representatives and the Senate.


Following this election, the Republicans will control the House of Representatives, the Senate and the Presidency.

But there is always more data. For example, when the US President has had a negative approval rating markets have done 4% better than when the President has had a positive approval rating.

These two somewhat counter intuitively, contrasting apparent causal relationships actually indicate that the relationship between investment market returns and the Presidency is a fairly weak one. What drives markets are businesses that innovate, solve problems and continually provide better goods and services at lower prices. Businesses have been doing this for hundreds of years and will continue to do so for many more.

Someone almost universally regarded as being one of America’s worst Presidents was Warren Harding, the 29th US President (1921 – 1923). Amongst his many blunders, he appointed a number of corrupt officials. One of his cabinet secretaries went to prison for corruption[1].

How did he get elected? Author Malcolm Gladwell suggested in his book Blink that people believed Warren Harding would be a good President because he appeared stately and Presidential. It was a “blink” decision.[2]

Why do we bring this up? Only because between 1921 and 1923, the Dow Jones returned around 32%[3].

An article in US magazine Money put it well:

“Conventional wisdom says a President’s economic policies matter greatly to Wall Street. But… investors since the Great Depression have managed to make money in war and peace and under successful and failed administrations.”[4]

Many investors are invested in portfolios built to last 20 to 30 plus years, our clients certainly are. Over that time frame, both good times and bad times are a given. That is the nature of capitalism which funds both worthwhile and worthless economic ventures the ultimate nature of which is only discernible in retrospect. We believe history shows that a globally diversified, low cost portfolio is a ship that can and will survive the storms of politics, because it is founded on the success of business.

Presidents come and go, but business in aggregate has never gone out of business, and won’t in the future, whatever President-elect Trump does.

So we encourage you to relax, tune into the news out of interest, but know that your long term plans are based on something much more solid and stable than politics.



[3] Based on data found at



This document has been provided for general information purposes only.  The information is given in good faith and has been prepared from published information and other sources believed to be reliable, accurate and complete at the time of preparation, but its accuracy and completeness is not guaranteed.

Any information, analysis or views contained herein reflect our opinion at the date of publication and are subject to change without notice.  To the extent that any such information, analysis, views or opinions may be construed as advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised advice under the Financial Advisers Act 2008, nor do they constitute advice of a legal, tax, accounting or other nature to any persons.  Past performance is not indicative of future results, and no representation or warranty, express or implied, is made regarding future performance.  To the maximum extent permitted by law, no liability or responsibility is accepted for any loss or damage, direct or consequential, arising from or in connection with this document or its contents.

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