As the United States presidential election looms around the corner, many investors are worried about what the affects of the presidential election will have on the stock market. Although up 5% for the year, September of 2020 was a volatile month for the stock market. The S&P 500 lost -3.7% of its gains and investors are blaming losses on fear of the upcoming election. There were other reasons for the losses, such as President Trump contracting Coronavirus and economic stimulus talks, but it's clear that some losses can be contributed to investor's fear of the upcoming election.
But what is it about the presidential election that could cause the stock market to dip? Do investors believe that a Biden presidential win will tank the stock market and a Trump win will strengthen it?
Many investors do believe that a Trump presidential re-election will be better for the market. They believe that he will provide looser regulations and lower tax rates which will allow the market to thrive. Alternatively they believe that Biden, a Democrat, will raise taxes and regulate the market in a way that'll hinder growth.
Why do investors believe that the stock market will favor a Republican win over a Democratic win? Other than mainstream news sources telling the population that a Trump win is better, there are no facts to back up the belief. It's absolute speculation and there's no way to know what exactly will happen to the stock market after the election.
As investors we like to speculate, which is no surprise if you consider the fact that the existence of the stock market and its movement is based on speculation. But I believe that it's time that we speculate by using more factual information rather than listening to the bias opinions of mainstream news outlets. Let's take a look at history to determine what actually happens to the stock market under Republican or Democratic White House control.
I did the research. You just have to listen.