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Votes & Volatility: Analyzing the Impact of Politics on Stock Market Behavior

The current political season indicates a choice between Trump and Biden for the upcoming election. Despite the curiosity surrounding their potential impact on the economy and stock market, we at Altrius believe that the resilient American economy will continue to flourish irrespective of political leadership. The success of prominent international companies under various political systems, including socialism, highlights the adaptability of capitalism and the persistence of economic growth.

We acknowledge that political concerns are at the top of clients’ and investors’ minds, but investment decisions at Altrius will remain unaffected by political biases. The historical performance of the Dow Jones Industrial Average (DJIA) index suggests that gridlock in Congress often leads to optimal returns, as companies thrive amidst stable policies and regulations. This stability allows businesses to strategically expand without the uncertainty of impending legislative changes hindering their progress.

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Looking at the data from a study conducted in 2021 over the 75 years post WWII from 1946-2020, it was clear that the market can perform well under any variety of political parties in control of the executive and legislative branches of government. The study used the DJIA index as a proxy for the general stock market. The average annual return of the index was 8.3% per year over the 75-year period. They broke down the political parties in office into five categories: Democratic vs. Republican controlled Presidency (A), Democratic vs. Republican controlled Senate (B), Democratic vs. Republican controlled House of Representatives (C), Democratic vs. Republican total control of the Presidency, Senate, and House of Representatives (D), and a split Congress (E).

It is important to understand there are many outside factors that also impacted the period including the Vietnam War, Cold War, Tech Bubble, Iraq War, Real Estate Bubble and subsequent Financial Crisis, oil embargo, and the COVID-19 Pandemic.

Volatility in the stock market during election years is anticipated, emphasizing the importance of maintaining focus on long-term investment strategies. While elections introduce uncertainty, successful investing necessitates a disciplined approach that considers various risk scenarios. Altrius' investment decisions reflect this, with a cautious stance on U.S. stocks due to the overvaluation of mega-cap tech stocks and a preference for undervalued foreign stocks with higher potential returns.

Acknowledging the inherent unpredictability of short-term market movements, Altrius emphasizes the importance of maintaining a disciplined investment strategy. As famed investor and businessman Warren Buffett said in his 1987 letter to Berkshire Hathaway shareholders, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” With over 27 years of experience in managing client assets, we prioritize long-term growth while respecting the market's volatility. This approach underscores our commitment to navigating market uncertainties and working with clients to achieve their investment objectives over time.

We remain available to answer any questions that you might have regarding our investment outlook and strategy or the current market situation and appreciate your continued trust.

For more information regarding our strategies and investment opportunities, please visit our website, www.altriuscapital.com.

Source:

Patton, Mike. “Stock Performance and the Political Party in Power: An Historical Look at the Past 75 Years.” Forbes, Forbes Magazine, 9 Nov. 2022.

MAXWELL T. GREENBERG, CFP®| EXECUTIVE VICE PRESIDENT || Bio || LinkedIn

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.” 

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Altrius Capital Management

Altrius Capital Management, founded in 1997, is a disabled veteran owned asset management firm that combines global macro investing with traditional value investing and dividend income and growth. This time-tested, three-pronged approach aims to provide solid risk-adjusted returns for their clients. Altrius is a provider of privately managed portfolios and financial planning services for industry professionals and private clients as well as a sub-adviser to the Altrius Global Dividend ETF, DIVD.

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