US Elections| Why outcome does not matter in the long-run; market strategist makes a $19-million point

Data spanning seven decades show that the outcome of US Presidential elections matter little to the stock market returns

Does the outcome of the US elections matter to domestic investors in the long-run? Not really, according to Charlie Bilello.

Bilello, who is the chief market strategist at wealth and investment management firm Creative Planning, shared a striking calculation he did to illustrate his point.

In the Rethink Your Money podcast, Bilello shared a calculation he did of the returns one could expect from the US stock market if the investing decision was made based on personal politics.

Bilello calculated the returns a person would have made if he/she had invested $10,000 in 1953 but decided to stay invested only during Republican presidencies. This person, said Bilello, would have made $289,000.

If another person had put the same amount, the same year, but decided to stay invested only during presidencies led by a Democrat, this person would have made $675,000.

But, the clincher was the calculation of returns made by a person who would have put in the same amount of money, the same year and had stayed invested through all presidencies. That person would have made, according to Bilello, $19 million!

In the long-run, stocks tend to go up, so if you take out (your money) whether it is during a Republican presidency or a Democractic presidency, you are going to be missing on compounding, said Bilello.

He said that the stock market could go down for the next four years after any election, but an investor must ask himself/herself whether the market will continue to go down for the next eight years or 12 years.

Think about the long-term return, he insisted, because you are likely to miss out if you are letting politics influence your portfolio.

While sharing the podcast on his handle on platform X, Bilello also shared a chart that showed how stock market returns have been little affected by which party is in power.

He said that the only time in the recent past that the stock market gave negative returns under a presidency, it was under George W Bush but Bilello said various factors added to that such as the dotcom bubble, 9/11 attack, recession and the financial crisis. The other times were under Franklin D Roosevelt (FDR) and before that Herbert Hoover, before the start of the Great Depression. Bilello put it to bad timing than the president's policy decisions.

He said that returns from the stock market have always been positive over a four-year term and the variations in returns seen under any party are "very, very small".

In the podcast, he said that people find it unbelievable that the most important person in the freeworld, who supposedly takes all the important decisions, has so little influence on the stock market. But Bilello said that this is a good thing.

He said, "Thank goodness this is the case, thank goodness this person does not have the capacity to influence the entire economy and the entire stock market".

He said that the leader of a country like China matters "very, very much" since they could make huge changes, whether good or bad. But, in America, the leader does not hold that powerful an influence.

He said that there will certainly be volatility in the weeks towards the elections or the days following it. But he said that investors should not focus on what happens on the night of the election or the day after the elections.

He recalled the Trump victory in 2016, when the US markets crashed and S&P 500 went limit down. But then it recovered all of it by open the next morning, he said.