His many comments to the contrary, the stock market is NOT going to crash and your 401K is not in jeopardy if Donald Trump loses the presidential election. Despite being one of the several claims made by Trump over the past several months, a host of financial experts and analysts say that's simply not true.
Ruchir Sharma, the chief global strategist at Morgan Stanley Investment Management, penned a recent column in The New York Times saying his own investment research, dating to the 1860s, showed the stock market "has no clear bias in favor of either party and that market volatility in the run-up to an election is perfectly normal."
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Sharma added investors largely believe Biden would, if elected, "govern more moderately when in office, raising taxes and regulation while decreasing tensions over immigration, global trade and China," which would have "little effect on the market's overall direction."
Other finance experts have predicted that if Biden wins and can wrangle control of the Covid-19 pandemic, the stock market could rise considerably.
Mitch Tuchman, Managing Director of investment firm Rebalance, said his company reviewed more than 100 years of financial data to understand the impact of presidential elections on the stock market (1960-2016) as well as stock market returns under different ruling political parties (1860-2010).
"History clearly shows us that stock markets generally behave positively during both presidential election years and subsequent years and that the market has maintained its upward trend over long periods of time regardless of who ends up in the White House," he said.
According to Rebalance stock market returns under different ruling political parties from 1860 to 2010 show annual returns of 8.2% per year for Republican presidents and 8.4% per year for Democratic presidents, based on a 60% equity, 40% fixed-income portfolio. The annualized compounded return is minimal between the two parties.
Tuchman said the long-term average returns of a diversified portfolio of stocks and bonds is virtually the same during Republican and Democratic administrations and historically not significant for stock market performance. "Any exceptions related to the party of a president are likely more related to economic conditions than politics," he said.