President is poor stock market predictor

David MoonBlog

I seldom make predictions, but late last year I made one that was as close to a sure thing as is possible: the closer we get to November 5, the percentage of public economic-political comments that are stupid would approach 100. We still have six months until the election, but my prediction has already proven accurate.

Here are a few more predictions, in each of which I have similarly high confidence. At least 50% of Americans and 40% of voters will believe that the winner of the presidential election will prove disastrous for our country. I also predict that the U.S. will survive another four years of either Biden or Trump.

Of course it matters who is the president, but like football quarterbacks, we too often attribute way too much credit to elected officials. Presidents (or other politicians) don’t create jobs, and they certainly don’t affect long-term moves in the stock market. The Dow Jones Industrial Average was 9,000 when Barack Obama was first elected president in 2008. Today the index sits at 37,000. Over these 16 years, we’ve witnessed a meltdown of the mortgage market, massive declines in housing prices, massive increases in housing prices, fears of a deflationary spiral, a generational jump in inflation, a multi-generational drop in bond prices, oil prices ranging from negative $38 a barrel to more than $123, a pandemic, and a complete shutdown of the world’s economies. On three occasions, the U.S. stock market experienced declines of more than 15 percent. And through all of that, the U.S. stock market increased an average 9.5% a year. Even in 2020, when the market plummeted almost 30% in only six weeks, the stock market managed to finish the year with a slight gain. The market increased during the presidencies of Obama, Trump and Biden. In the past 50 years, it has increased during every presidency except Bush 41.

If an investor had put $1,000 into the stock market 70 years ago and left his money in stocks only when a republican was president, he would have $27,000 today. Instead, if he had his money in stocks only when a democrat was president, he would have more than twice that amount: $61,800.

However, if he had simply left his money in stocks for the entire 70 years, disregarding the president’s political affiliation, his original $1,000 would currently be worth $1.69 million.

No one can accurately predict where the stock market is headed in the new few months or even the next year, especially based on the outcome of an election. But that doesn’t prevent people from pretending that they can.

David Moon is president of Moon Capital Management. A version of this piece originally appeared in the USA TODAY NETWORK.