By Michael Vaughn, CFP®
The 2024 presidential election has been decided in favor of Donald Trump. One of the biggest issues voters were concerned about was the economy and how the change in leadership might affect their pocketbooks. This raises a very good question about how the presidential election impacts the economy.
Historically, while the president can certainly influence some economic policies, the capital markets have not experienced lasting changes in the wake of elections. Although the returning president has made promises of deregulation and extending tax cuts, Americans can expect most of their investments to remain much the same.
While it’s always a good idea to reflect on your investment status in the wake of developing news, making decisions based purely on political events can be reactionary and emotionally driven—neither of which is a sound investment strategy. Let’s look more closely at how the presidential election impacts the economy and how you should proceed with your investments.
Limits on How the Presidential Election Impacts the Economy
Fairly or not, American presidents are judged by how the economy performs while they’re in office. But while they may drive policy decisions and changes to the tax code, there’s only so much influence they have on the inner workings of the economy.
One metric analysts may look at when evaluating the presidential economy is stock market performance. That’s a bit misguided because, in reality, the president has very little long-term control over the stock market. They may make decisions that could affect investor confidence or impact certain business sectors, but those effects are usually short-lived.
Instead, changes in the commodities marketplace are generally the effect of long-established market cycles and broader socio-economic changes. If there’s a little market volatility around the beginning or end of a president’s term, it’s likely due to those external factors rather than the election itself.
Whether a Republican or Democrat occupies the White House isn’t a big factor in the stock market either. Both parties have experienced economic success and downturns, but the S&P 500 index has seen continued growth since 1933. No data suggests that one party is more beneficial to the economy than the other.
There have been a few significant events that have changed fortunes, like the 1929 stock market crash, World War II, the tech boom and crash around the turn of the century, and the Great Recession of 2008. Those market catalysts don’t reflect how the presidential election impacts the economy.
Economic Strategies for a New Administration’s Economy
There are some ways the president can “nudge” the economy on a small scale. They make recommendations based on their fiscal policies and generally lead the charge in changing tax policies. They can make Federal Reserve appointments and issue responses to major fiscal events. But they have about as much control over the greater economy as you do—meaning not much.
The best way to handle your finances during a political change is to refocus on your financial goals. Your choices and perspective have far more to do with the growth of your investments than how the presidential election impacts the economy.
The marketplace runs in cycles. Sudden rises and falls happen frequently—as do long periods of relative inactivity. It’s illogical to make constant investment changes in reaction to market events. That’s akin to making emotion-based decisions, which are counter-productive to investment success.
Find a Trustworthy Advisor to Navigate the Economy
In the end, how the presidential election impacts the economy isn’t terribly important. Your personal and family investment goals are. A solid financial advisor has years of experience in all political climates and can keep you focused on your best interests.
Pinnacle Family Advisors gives investment advice that can keep you afloat and thriving no matter who occupies the Oval Office. Schedule your complimentary introductory meeting by emailing me at [email protected], calling (417) 351-2942, or using my online calendar. You can also contact me online or visit my personal webpage.
About Michael
Michael Vaughn is a CERTIFIED FINANCIAL PLANNER® professional and Vice President at Pinnacle Family Advisors (PFA) with 24 years of industry experience. Before joining the PFA family, he served clients with investment management and retirement planning at The Mutual Fund Store for 14 years. Michael graduated from Missouri State University with a bachelor’s degree in business administration and management and earned his CFP® certification in 2004. He also served 20 years in the Missouri National Guard, retiring in 2007 as a Major. He currently volunteers on the board of directors for Good Dads and Fellowship of Christian Athletes. Michael is married to Lori and they have two daughters. To learn more about Michael, connect with him on LinkedIn.