Nobody can predict stock market performance based on who wins the presidency | Opinion

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 Nov. 5, the percentage of public economic and 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 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 Joe Biden or Donald Trump.

Of course it matters who the president is, 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 the past 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%. And through all of that, it 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 that of George H.W. Bush.

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 be worth $1.69 million.

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

David Moon, president of Moon Capital Management, may be reached at david@mooncap.com.

This article originally appeared on Knoxville News Sentinel: Opinion: Don't look to president to predict stock market performance