For months, Election Day looms large in America, and on Wall Street. While not everything that happens in the White House or Capitol Hill affects the stock market, the votes cast by Americans across our great country ultimately determine who will make our laws and shape our monetary policy for years to come.
While the composition of Congress is very important, most people tend to focus on who wins the Oval Office. As of 5:42 am ET, based on projections by the Associated Press (AP), former president and Republican Party presidential nominee Donald Trump has won the presidency.
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Former President Donald Trump signing the bill in the Oval Office. Image source: Official White House Photo by Shealah Craighead.
According to calls made by the AP early Wednesday, Donald Trump held 277 to 224 Electoral College votes over Vice President and Democratic presidential nominee Kamala Harris. Only 270 votes are needed for victory.
Admittedly, there are campaign proposals from former presidents that worry economists and/or investors.
For example, Trump has proposed applying tariffs on US imports to boost domestic production and make American-made goods more competitive. Specifically, he suggested that imports from China should be subject to a 60% tariff, with a 20% tariff applied to other nations.
While this proposal may sound good on paper, there is a real risk that the tariffs will raise costs for American consumers and businesses, as well as worsen trade relations with the world's No. 2 economy, China, and our allies.
On the other hand, investors had little to complain about during Trump's first time in the Oval Office. An iconic building The Dow Jones Industrial Average(DJINDICES: ^DJI)benchmark S&P 500(SNPINDEX: ^GSPC)and driven by innovation Nasdaq Composite(NASDAQINDEX: ^IXIC) respectively achieved 56%, 67%, and 138%.
With Republicans retaking the Senate and Trump's victory, the prospect of higher taxes for American business has been taken off the table. This likely paves the way for Wall Street's most influential businesses to continue their share buyback plans.
However, there is a bigger winner tonight than President-elect Donald Trump.
Image source: Getty Images.
While there are still seven Senate seats and 59 House races left for the AP to call at the time of this writing, the undisputed winner of Election Night is Wall Street investors.
A little over three years ago, the president of Integrity Wealth Management and Forbes Contributor Mike Patton released a data set that examines the average annual return of the Dow Jones Industrial Average from 1946 to 2020 across all political scenarios. For example, when Republicans controlled the majority of seats in the Senate, the Dow produced an average annual return of 11.3%! This is significantly higher than the average annual return of 6.3% when Democrats held control of the upper house of Congress.
By comparison, Republican presidents have overseen a 7.4% annual return on the Dow over 75 years, which is slightly less than the 9% annual return Democratic presidents have delivered.
Here's the thing: Regardless of which party controls the House, the Senate, or the White House, Patton's data set showed that the average annual return on the Dow ranged from 6.3% to as high as 12.9%.
Analysts at Retirement Research looked even further back with their analysis, which examined the average annual return of the S&P 500 from 1926 to 2023. In the 34 years that the Republican presidency and Congress was divided between the two parties, the S&P 500 averaged 7.33% annual return. But in the 13 years that the Republicans controlled both houses of Congress again White House, the S&P 500 averaged an annual return of 14.52%.
Although this data shows that, statistically, certain conditions have historically been more beneficial to Wall Street than others, the most important takeaway is that stocks can perform well regardless of which party is in power or who wins the White House.
Perhaps the greatest lesson of all investment studies comes courtesy of Crestmont Research. Every year, Crestmont updates a data set that examines the 20-year total return, including dividends paid, of the S&P 500, dating back to 1900. Even though the S&P didn't exist until 1923, researchers were able to track it. its parts in other directions, thus leading to 105 different 20-year periods (1919-2023).
Crestmont Research found that all 105 of these 20-year periods produced annualized total returns. In plain English, if, hypothetically, you bought the S&P 500 tracking index at any time since 1900 and held the position for 20 years, you made 100% money in that time.
In addition, you often do a lot of money. In more than half of the 20-year 105-year period examined, the annual total has reached or exceeded 9%.
While the election is top news, it distracts from the real hero for Wall Street investors: time.
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Donald Trump Is President-Elect — but Someone's Winning Bigger Today was first published by The Motley Fool.
