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Well then. What was expected to be a highly contested and long drawn-out election turned out to be anything but. Election results were pretty much known the night of, and there was little to no drama. Markets, which frown on uncertainty, stormed higher the next day as there was a sense of relief that the worst case was avoided. Vice President Harris delivered her concession speech the following evening, and markets rallied even more the following day. It was about as calm and straightforward an election as one could have hoped for. Now, people's reactions and feelings vary widely depending on which candidate they were rooting for. Ultimately, I hope the country finds a way to come together moving forward. We will never agree on everything, but finding common ground is essential.

As humans, we have emotions that can get the best of us at times. On the other hand, markets are not political and do not care about most of what we focus our time on. The market primarily cares about one thing, as eloquently stated by James Carville, "It's the economy, stupid." The market does not care, and nor should it, about who is being appointed to what positions. It does not care about DEI initiatives, potential Supreme Court nominees, or political retribution. It cares about ECONOMIC GROWTH, full stop. If viewed positively, markets are likely to rally regardless of who the President is. It's that simple. Now, whether those things actually play out is another story.

Many were surprised to see the stock market rally as much as it did after the election, but it makes sense when looking at it objectively. The global economy is on solid footing and the worst of inflation is behind us for now. Election uncertainty was the big wildcard, and once that was removed, markets resumed their upward trajectory. Of course, markets also approve of President-Elect Trump's stance of lower corporate taxes and reduced regulation. While nothing is certain, markets will function like they always have and always will, based on underlying economic data and support from the Federal Reserve. After the 2008 financial crisis, the Federal Reserve took a more hands-on approach through asset price inflation, which was a large driver of the stock market rally after 2008.

The chart below shows that the S&P 500 has performed remarkably well under most Presidents. The significant declines were primarily tied to economic events such as the Great Depression (1929-1932) and the financial crisis (2008). In the end, the President can try to enact policies to impact economic growth, but a majority comes down to economic cycles, which are largely out of the President's control. One thing to note is that the chart does not reflect the ~+28% gain in the S&P 500 in 2024 as the year still needs to be completed.

Now, I know many think that President Trump has an unorthodox way of doing things, and while it is true, markets judge the economy, not the person. A good case in point is the 2016 and 2020 elections. A quick Google search led me to COUNTLESS articles calling for rough markets when President-Elect Trump won in 2016 and the same with President Biden in 2020. Yet the S&P 500 has increased by ~130% since the start of 2017! That equates to a ~16% annualized return. I don't know about you, but I would take that in a heartbeat. Even more, we've experienced five years (2017, 2019, 2021, 2023, and 2024) of 20%+ annual gains and only one 10%+ annual decline (2022). Perhaps the most remarkable stat is how the S&P 500 has performed nearly IDENTICALLY under both. As of this writing, the S&P rallied ~+66% under President Trump and ~+63% for President Biden. This seems impossible, right? But that's precisely what happened. This illustrates how markets are less concerned about who the actual President is and more so about the global economy and the Federal Reserve.

Of course, there will be a long list of things to worry about, ranging from another potential government shutdown in late December, significant economic and inflation data points, and a new administration that promises to shake things up. We know markets dislike uncertainty, and we will surely get some of it. This is the nature of the beast. The one question that no one knows the answer to is just how much of the new administration's proposals will be implemented. History shows us that much of what is said on the campaign trail doesn't end up happening. Can this time be different? Sure, but that doesn't spell doom. It may not match your personal beliefs/values, but the market doesn't care. Instead, it focuses on economic growth and corporate profits, which generally trend higher over the long run. I know it can be challenging, but when it comes to your investments, put your political emotions aside and think about the fundamentals. This is where diversification can be your best friend.

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