Monday, 19 October 2020

Stock Market: Is Biden Presidency Bad for Market?

Firstly, as i always say, price is king. Just look at price and you know what the market thinks who would win. And much more importantly, where it's heading.

But lately, i keep reading / hearing that Biden win is bad for market, implying that a Democrat's government is bad for the market. There's little evidence of that (perhaps, it's just fake news). The contrary is true. I.e. Democrat has been good for the stock market historically.

Stock performance under different presidents since Reagan

As you can see from the chart above, stock market did well under the Dems. This is why the futures market dropped some 5% in 2016 election overnight when market learnt that Trump had won the election. I imagine the futures based this bearishness on the fact that Republican government is bad for the stock market.

But the tax cuts proved to be a boon for the stock market. Still, overall, the stock market is doing okay under Trump, but not as good when compares to the recent Democrat presidents. The chart below is probably a better or visual representation for the more technically minded like myself.

As you can see from this chart below, while market is doing okay under Trump, it's the most volatile, thanks to tax cuts (which is bullish), followed by trade war (which is bearish), and then followed by rate cuts (which is bullish) and then finally Covid-19. Biden probably makes investing much less turbulent.

So if Trump is reelected, then it's like the election never occurs. If Biden wins, it should be even better for the stock market just based solely on history.

But then, who knows? Let me reiterate, price is king. Don't try to speculate on who's better for the market or who will win (although the PredictIt website bets that Biden has a better odds of winning).

I'm just writing this to give general info that Democrat is good for market, and to correct the idea that Trump is a better choice for the stock market because he runs a Republican government. So don't pray for Trump's win if you're a bull. You just get more volatility with his unpredictable tweets. We know for a fact that Biden doesn't tweet like this.

P.S.  I suspect the volatility lately is due to the stimulus bill rather than the election because market would perform better if Biden wins based on history. But it's Roctober. So expect volatility, election or no election.

P.P.S. I'm not an American citizen. So i don't have any skin in the game, and so don't care who wins (at least politically). More importantly, i don't even care why market goes up or down. Just care about where it's going. You should do that too if you want to remain objective. Do your investing a favour, ignore politics and economics (both i'm deeply interested and know a great deal, and have learnt that these 2 things WILL hurt your investing if you don't ignore them. Learnt these things, sure. I still do. But ignore them when doing technical analysis. Keep your eyes on the prize, which is price, not politics or economics).

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