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Brett Arends's ROI

Nov. 24, 2020, 7:40 a.m. EST

Arguing Trump, Biden & your 401(k) with Uncle Alfred: A Thanksgiving Tale

By Brett Arends

The scene: Your Thanksgiving table. The entire family is sitting around it, six feet apart, trying to eat turkey, gravy and stuffing, drink beer, and talk — all while wearing masks.

Suddenly Uncle Alfred speaks up.

Uncle Alfred: You mark my words! The economy’s going to go to hell in a handcart when Trump leaves office next year. The stock market’s going to collapse. You’d better sell everything in your 401(k) before it becomes a 201(k)!

Aunt Jemmy: Alfred! Put your mask back on!

Uncle Alfred: (Mumbles, and puts mask back on)

You: Uncle Alfred — why do you think the stock market’s going to collapse under Biden?

Uncle Alfred: The Democrats are bad for business. More taxes. More regulations. More deficits. Everybody knows that. They’re all socialists.

You: Well, over the past hundred years the stock market’s actually done better under Democratic presidents than Republican presidents. 

Uncle Alfred: That’s not true. We’ve had a fantastic stock market under Trump.

You: Yes we have. But it’s also been good under a lot of Democrats. Adjusting for inflation, it’s up 0.9% a month on average under Trump. But it was up 1% a month under Obama, and 1.2% a month under Clinton.

Uncle Alfred: That must be fake news!

You: Well, the numbers are based on Robert Shiller’s data. He’s a finance professor at Yale. He won the Nobel Prize for economics. Take it up with him.

Uncle Alfred: (Mumbles and takes a forkful of mashed potatoes.)

You: In the past 100 years the stock market did worst under Hoover, Nixon and George W. Bush. All three were Republicans. They’re the only presidents where the S&P 500 (S&P:SPX) lost value against inflation.

Uncle Alfred: So what? You’re trying to tell me Republicans are bad for the stock market?

You: No. There aren’t enough data points to draw any simple conclusions. Presidents don’t control the stock market anyway. I’m just saying there is no evidence the stock market will do worse under Democratic presidents than Republicans. If anything, the evidence points the other way.

Also see: ‘Thanksgiving dinner doesn’t need two headless chickens fighting over the soul of the nation’: If you must talk politics, read these rules first

Uncle Alfred: That Nancy Pelosi is going to destroy the economy. She must be a socialist. She’s even from California!

You: Nancy Pelosi has somewhere up to $80 million of her own money invested in stocks. Do you really think she’s going to tank her own portfolio?

Uncle Alfred: What about that AOC and her Green New Deal? She’s going to kill the energy industry! We’re all going to have windmills on our roofs and have to go everywhere on trams powered by manure.

You: Well, she’s only one Congressperson out of 435. And the stock market doesn’t seem to be worrying. Energy stocks are up since the election. Exxon’s (NYS:XOM)  up about 20% just in a couple of weeks. And they went down under Trump. Literally, overall energy stocks (PSE:XLE) lost about 40% on his watch. Oh, and they doubled under Obama. Literally: About a 100% total return.

Uncle Alfred: OK, what about inflation? We’d better all put our 401(k)s in gold because it’s going to go through the roof! I remember what happened under Jimmy Carter.

Aunt Jemmy: Oh, I liked that Jimmy Carter. Not such a good president but such a nice man. Do you know he’s spent all his time since he left office building affordable housing for people in need?

Uncle Alfred: (Mumbles and takes a mouthful of stuffing)

You: Well, the bond market’s not worried. It’s predicting inflation of less than 2% a year for the next ten years. That hasn’t changed since the election.

Anyway, gold’s been doing much better under Republican presidents lately than Democrats. It tripled under George W. Bush, and is up 50% under Trump. It actually went down under Clinton and it went up just 4% a year under Obama. So maybe gold investors are more worried about Republicans than Democrats?

Uncle Alfred: OK, then, know-it-all: What’s the stock market going to do next?

You: I can only quote John Rockefeller or J.P. Morgan Sr. There’s an old Wall Street legend that someone asked one of them — nobody can agree which one — that very same question, and he replied: “It will fluctuate.” Could you pass the stuffing please? 

Link to MarketWatch's Slice.