Published On: November 2, 2020
Written by: Ben Atwater and Matt Malick
With a record 94 million votes cast before tomorrow’s election day, voter participation in our representative democracy appears strong.
In this series, we have written two articles called, Elections Don’t Matter (For Markets) and Elections Don’t Matter (Part II), where we examined historical data strongly suggesting elections, in and of themselves, have not altered investment returns regardless of who wins or loses.
Today, in our final article before the big day, we want to emphasize that even if we knew who was going to win tomorrow’s election, and we knew their policies, it would still be of little use. There are too many forces at play on markets to think an election is a game changer.
President Trump is arguably the most pro-fossil fuel president in modern times, at least rhetorically. Even oilmen George W. Bush and Dick Cheney did not promote the coal, natural gas and oil industries the way the president does. Candidate Trump ran partially on “big beautiful clean coal” in 2016 and in 2020 he is largely battling for Pennsylvania by accusing Biden of wanting to ban fracking, while voicing his unconditional support for the natural gas industry.
Directly following Trump’s election in 2016, the energy sector rallied slightly due to what everyone viewed as a very bullish policy for the industry. In the week following Trump’s election energy rallied 2.44%.
However, policy ended up making no difference at all after this initial one-week price bump. Despite a pro-energy administration, the energy sector under the Trump Administration has been the worst relative-performing sector in the history of the S&P 500, falling 39.41% on a total return basis.
As much as President Trump promotes the fossil fuel industry, he criticizes internet giant Amazon and its founder Jeff Bezos. During the 2016 campaign Trump accused Amazon of tax evasion. Trump’s favored nickname for Bezos is Jeff Bozo. Not only does Bezos own Amazon, but he also owns the Washington Post, a newspaper whose reporting has often been critical of Trump, prompting accusations by the president of being “fake news” and serving as a tax shelter for Bezos and Amazon. No surprise then that much like energy rallied in the week after Trump’s election, Amazon fell 5.65%.
Despite this fall in the week after the election, politics ended up making no difference to Amazon. With Trump continuing to regularly attack Bezos and Amazon, and even threatening to withhold funding from the post office if the postmaster did not raise Amazon’s postal rates by “four or five times,” Amazon continued its jaw dropping stock performance through Trump’s term, rising 280.1%.
We hope these two anecdotes offer further evidence of the exaggerated effect of politics on U.S. markets. If the president loves your industry or hates your company it does not guarantee good or bad performance. In this case, quite the opposite. There are too many forces at work for politics to dominate markets.