The Market Focuses More on the Macro Environment than Elections

President Obama and President Trump pursued very different policies while in office.  Yet results in the financial markets were awfully similar during their terms.  This supports our belief that the fundamental, macro environment has more influence on markets than which political party is in charge.

The chart below compares performance of the S&P 500 and across asset classes and sectors under the Trump administration versus the prior four years of the Obama administration.  The leadership is nearly the same.  The winners include technology, large-cap growth, consumer discretionary, healthcare, and US equities.  The laggards contain commodities, energy stocks, and international equities. 

How could this pattern have developed when each administration applied such drastically different policies?

We believe the economic regime has far more influence on market returns than politics.  The past eight years have seen several persistent economic trends:  slow growth, low inflation, and easy monetary policy.  This type of macro environment benefits growth sectors such as technology, consumer discretionary, and healthcare.  It is less beneficial to value sectors (example, low interest rates are a headwind to financials), and a headwind to commodity-producing companies, such as energy and materials, which are seeing lower commodity prices. 

What’s an Investor to Do?

Many investors and commentators speak about politics and investing in the same breath.  The data doesn’t support this link.  We discourage investors from making investment decisions based on who is in the White House. 

We believe earnings, economic growth, and decisions made by the US Federal Reserve are more important drivers of stock market performance.  Therefore, we look to these fundamentals to help guide our investment decisions. 

While we can’t say for sure who will win in November, we can say that staying invested has made the most sense for investors over time.



Past performance may not be indicative of future results. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that their future performance will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. The statements made in this newsletter are, to the best of our ability and knowledge, accurate as of the date they were originally made. But due to various factors, including changing market conditions and/or applicable laws, the content may in the future no longer be reflective of current opinions or positions. Any forward-looking statements, information and opinions including descriptions of anticipated market changes and expectations of future activity contained in this newsletter are based upon reasonable estimates and assumptions. However, they are inherently uncertain and actual events or results may differ materially from those reflected in the newsletter. Nothing in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice. Please remember to contact Signet Financial Management, LLC, if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and/or services. No portion of the newsletter content should be construed as legal, tax, or accounting advice. A copy of Signet Financial Management, LLC’s current written disclosure statements discussing our advisory services, fees, investment advisory personnel and operations are available upon request.

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