Does the President Affect the Stock Market?

During the dotcom bubble while Bill Clinton was President of the United States, the euphoria of greed took over the stock market. During election years in America, people's emotions get high because of differing views when it comes to political policies. I'd hate to be the bearer of bad news, but the stock market doesn't care about who the President is.

I remember, when I was taking an advanced Microeconomics class while attending the Florida State University and the professor worked as a consultant for the Federal Reserve. He was aloof and one day he came into the classroom to tell us that,

"Everyone thinks Bill was a great President...Bill was busy doing other things..."

He then went on to talk about what the lesson of the day was to tell us about the production function and that due to the increase the internet had on productivity, it didn't matter who the president was during the bull market of the 1990s.

Fast forward to now, and we're starting to experience similar outcomes with Artificial Intelligence taking the main stage. The productivity that A.I. is allowing our world to take advantage of is making people more efficient. And when people become more efficient and the cost of capital remains the same, corporate earnings start to increase. As a result, it doesn't matter who the President of the United States is during these times.

Obviously, certain policies depending on whether the president is a Republican or Democrat will have certain lagging effects on our economy. This is called implementation lag , which you can relate to the Federal Reserve raising interest rates to get inflation under wraps. Even though they raised interest rates significantly, it still takes a considerable amount of time to see the effects. The policies the President puts into place are no different.

As Elaine Karmark wrote in her article "The Fragile Legacy of Barack Obama, "

In the end there are only two ways a president can forge a legacy in U.S. politics: accomplish things with bipartisan support, or nurture his political party so that people are elected who will carry on and protect his?accomplishments. Obama’s legacy is in trouble because he did neither. For him, the first path was difficult—and some would say impossible.

Regardless of whether you like who the President is or not, you have to realize that the President has very little to do with what's going on in the world of investing during their tenure as Commander in Chief. What is more important is to fast forward in time and see if the policies they put in place had a positive or negative impact on our country.

To Growth, Family, and Philanthropy,

Joshua Krafchick | 369 Financial