Investing

What to expect from the market if Trump or Biden wins the 2020 election, according to experts

It may not matter to your portfolio whether Biden or Trump wins the 2020 presidential election.

People sit and watch a broadcast of the first debate between President Donald Trump and Democratic presidential nominee Joe Biden with socially distanced outdoor seating at The Abbey on September 29, 2020 in West Hollywood, California.
Mario Tama | Getty Images

The markets don't like uncertainty, including political uncertainty: That was proven again recently when they dropped overnight after the president announced his coronavirus diagnosis. And analysts have been split on the market's short-term reaction to whoever wins the November 3 presidential election.

But in terms of the market's long-term performance, it really may not matter who wins the Oval Office.

Many economists and financial experts would advise against basing your portfolio on who you think is going to win an election. As behavioral finance expert Morgan Housel recently tweeted, "Among the [long] list of predictions, few have as bad a track record as 'If X wins the election, the economy/stock market will do Y.'" 

Most presidents see the market rise during their tenure

History bears out Housel's tweet. Ever since President Harry Truman was in office (1945-1953), there have been only two U.S. presidents whose terms ended with the S&P lower than they had been at the beginning of their term: Richard Nixon and George W. Bush.

All other U.S. presidents starting from the middle of the 20th century left office with the S&P higher than it had been when they began.

Historically, the stock market has trended up. Not ever-upward like Jack's beanstalk, to be sure, but more like a man climbing a staircase with a yo-yo, explains Neal Solomon, a CFP and managing director of Saratoga Springs, New York-based WealthPro, LLC.

The trick is to keep focused on the bigger picture.

"If your eyes are stuck on the yo-yo, you see it go up and down," he says. "But the big trend is that the man is climbing the stairs. He is going up even when the yo-yo goes up and down."

The key to investing in an election year: Diversify, diversify, diversify

There are ways to position your portfolio to benefit no matter who wins the election. Economist Jamie Coxmanaging partner of Harris Financial Group in Richmond, Virginia, says that investors have "two tracks" in terms of your investment strategy surrounding the election — and no, those two tracks are not "if Biden wins" or "if Trump wins."

The first track: "If you're already diversified, don't do anything," he says.

The second track: "If you're not diversified, then diversify. That would be the only circumstance where someone should make portfolio moves" in anticipation of an election, Cox says.

In Cox's work as a financial advisor, he says, he answers questions about candidates' potential effect on the market "a hundred times a week." He thinks people tend to overestimate the impact that presidents have on the market, particularly for this upcoming election.

"In this cycle, it's a coin flip," he says. "There's not going to be much difference [in the markets] no matter who wins. I have a feeling it won't be as volatile as people think."

VIDEO3:2003:20
How to plan for stock market downturns

Video by Stephen Parkhurst

CNBC anchor Jim Cramer, a former hedge fund manager, takes a similar view. "I think there's a genuine belief that it doesn't matter who wins. It doesn't matter about stimulus," Cramer said recently on CNBC's "Squawk on the Street."

There is an issue that will have a strong, clear impact on markets, and it's not the race for the White House, Cox believes. "What is the one thing that matters more than anything right now? It's the pandemic," he says.

"Being able to return to normal will have an automatic positive effect on markets because it will increase consumption and that is really, really important. That should be a far bigger focus to investors than the outcome of the election."

More from Grow:

acorns+cnbcacorns cnbc

Join Acorns

GET STARTED

About Us

Learn More

Follow Us

All investments involve risk, including loss of principal. The contents presented herein are provided for general investment education and informational purposes only and do not constitute an offer to sell or a solicitation to buy any specific securities or engage in any particular investment strategy. Acorns is not engaged in rendering any tax, legal, or accounting advice. Please consult with a qualified professional for this type of advice.

Any references to past performance, regarding financial markets or otherwise, do not indicate or guarantee future results. Forward-looking statements, including without limitations investment outcomes and projections, are hypothetical and educational in nature. The results of any hypothetical projections can and may differ from actual investment results had the strategies been deployed in actual securities accounts. It is not possible to invest directly in an index.

Advisory services offered by Acorns Advisers, LLC (“Acorns Advisers”), an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Brokerage and custody services are provided to clients of Acorns Advisers by Acorns Securities, LLC (“Acorns Securities”), a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Acorns Pay, LLC (“Acorns Pay”) manages Acorns’s demand deposit and other banking products in partnership with Lincoln Savings Bank, a bank chartered under the laws of Iowa and member FDIC. Acorns Advisers, Acorns Securities, and Acorns Pay are subsidiaries of Acorns Grow Incorporated (collectively “Acorns”). “Acorns,” the Acorns logo and “Invest the Change” are registered trademarks of Acorns Grow Incorporated. Copyright © 2019 Acorns and/or its affiliates.

NBCUniversal and Comcast Ventures are investors in Acorns Grow Incorporated.