What the history books say
A glance in the history books tells us that just 4 out of 23 election years since 1928 have generated a negative return on equities, and all election years have produced a positive return if return was positive in January. As I write, the US S&P500 index is up 3.1% so far this month. However, these are mere statistics and give no guarantee for the future, plus Donald Trump is not a man who normally follows the history books.
We can also see that sitting presidents have more often been elected in election years with falling unemployment and rising consumer and business confidence, and Donald Trump will presumably do his utmost to keep US voters happy and financially secure in 2020. We therefore do not particularly expect any further escalation in the trade war that could hit US jobs and consumers, though with Trump you can never say never. Several times in 2019 we saw that a single tweet from the president on Twitter can be enough to trigger considerable turmoil in the financial markets.
We still expect equity prices to rise
All in all, US politics will be the source of much political uncertainty, tension and fascination in 2020 – but that does not alter our underlying expectation that investors can expect a reasonable return from equities this year. Under the troubled surface it is essentially economic growth and corporate earnings that are the driving forces, and we still see the necessary potential here.
This content is not investment advice - you should always speak to an advisor about how a possible investment matches your investment profile before making an investment.