Major US stock market indexes rose throughout the week as election projections put Democratic candidate Joe Biden closer to a White House win.
US president Donald Trump has repeatedly promoted the rising value of stocks as a sign of his economic success. However, gains over the last week suggest the market is not dependent on him for its continued growth.
Prior to election day on Nov. 3, the US financial markets were already sending signals they were expecting a Biden win and a “blue wave” of Democratic wins in the Senate. The blue wave may not have transpired, but the expectations for greater stability from the White House and the possibility of a large stimulus package boosted sectors including consumer staples.
Some investors cautioned against going too far factoring in an election when considering a retail or institutional investment portfolio strategy.
Commonwealth Financial Network chief investment officer Brad McMillan said he saw this happen repeatedly, including both times president Barack Obama was elected. “Investors were convinced that this was it, this was the end,” he said. “The reality is that if you step back a bit, and you look at both the economy and the markets, you can’t really tell whether it was a red administration or blue administration.”
Even with legislation like the Tax Cuts and Jobs Act passed in 2017, McMillan believes the US economy is largely disconnected from politics, and any influence an administration can have is largely at the margins. “From my perspective, as an investor, I don’t care who wins,” he said. “As a citizen, I certainly do, but as an investor, we’ll be fine over time.”
Chris Zaccarelli, chief investment officer of the Independent Investor Alliance, echoed the sentiment. “A lot of trades that we put on are designed to work regardless of who wins the presidency,” he said.
In such a closely divided political climate, it’s a very reasonable strategy.