Market Impact of Democratic vs. Republican Wins

Market Impact of Democratic vs. Republican Wins

US Election
Althea Spinozzi

Head of Fixed Income Strategy

Summary

  • Stock Markets: Historically, stock markets tend to perform better in the first year following a Democratic presidency, with indices like the Russell 2000 and NASDAQ showing stronger gains. Republican presidencies have seen mixed performance, with certain sectors such as energy and industrials benefiting from deregulation.
  • Gold: Gold often performs well regardless of the president’s party, but significant peaks are observed during Republican presidencies due to economic uncertainty and geopolitical tensions. Democratic presidencies generally see more stable or declining gold prices as economic stability improves.
  • WTI (Crude Oil): Mixed performance is typical, but more significant gains are usually seen under Republican presidencies due to policies favoring fossil fuel industries. Democratic policies might focus more on renewable energy, resulting in stable to moderate gains for WTI crude oil.
  • U.S. Treasuries: Bond markets generally remain stable under both parties, showing neither consistent gains nor losses directly tied to the president's party. Safe-haven demand and economic policies significantly influence performance.

Historical Market Reactions Based on elected U.S. Presidential Parties.

Democratic Presidents

Bill Clinton (1993, 1997)

  • Economic Context: The early 1990s saw the end of a recession, followed by a period of robust economic growth. Clinton's presidency is often associated with fiscal discipline, technology boom, and globalization.
  • Stock Markets: Benefited from a strong economic recovery, technological advancements, and a surge in consumer confidence. By 1997, the stock market saw an even stronger performance, with the S&P 500 rising by about 33%.
  • Gold: While in 1993, gold prices rose by 17.64% due to the lingering effects of the early 1990s recession, currency stability concerns, and inflation fears, in 1997, gold prices dropped by 21.48% driven by a strong U.S. dollar, reduced inflation concerns, and robust economic growth.
  • WTI (Crude Oil): In 1993, WTI crude oil prices dropped due to increased production from non-OPEC countries, sluggish global economic growth, and relative geopolitical stability in the Middle East. In 1997, prices fell further due to the Asian financial crisis reducing demand, increased global oil production, and Iraq's return to the oil market, leading to an oversupply.
  • U.S. Treasuries: Rose influenced by the Federal Reserve's accommodative monetary policy with low interest rates to support economic recovery in 1993, and a cautious approach with modest rate adjustments to sustain growth and control inflation in 1997.

Barack Obama (2009, 2013)

  • Economic Context: Obama inherited the Great Financial Crisis (GFC), leading to significant economic challenges. His administration implemented stimulus measures and financial reforms to stabilize the economy.
  • Stock Markets: Experienced a strong rebound from the recession lows, driven by economic recovery measures and improved investor confidence. In 2013, stock markets had a robust performance, with major indices reaching new all-time highs. The S&P 500 and the Dow Jones Industrial Average saw substantial gains, driven by continued economic recovery, corporate earnings growth, and supportive monetary policies from central banks, particularly the Federal Reserve's quantitative easing program.
  • Gold: Prices saw significant increases in 2009 as investors flocked to safe-haven assets amid the economic uncertainty of the Great Recession. However, following President Obama's reelection in 2012, gold prices declined as the global economy began to recover, inflation fears eased, and the Federal Reserve initiated the tapering of its stimulus measures.
  • WTI (Crude Oil): In 2009 WTI prices rose significantly to about $82 per barrel, recovering from the financial crisis-induced lows, supported by economic recovery and increased demand. Following President Obama's reelection in 2012, prices remained stable in the $90-$100 per barrel range, driven by steady global economic growth and increased oil production, particularly from the U.S. shale boom.
  • U.S. Treasuries: Initially benefited from safe-haven demand following the Global Financial Crisis in 2008, but yields on longer-term U.S. Treasuries rose during 2009 despite the Federal Reserve's accommodative policies. As the economy began recovering from the Great Recession, concerns about potential future inflation due to quantitative easing and other stimulus measures drove U.S. Treasury yields higher. Additionally, to finance the massive fiscal stimulus and bailout programs, the U.S. government issued a large amount of Treasury securities. This increased supply coincided with a rise in investors' risk appetite, leading to a rotation from safe assets to riskier ones, such as stocks. In 2013, with the economic outlook improving, the Federal Reserve signaled a reduction in its stimulus measures, reflecting a shift towards higher interest rates, which put pressure on U.S. Treasuries.

Joe Biden (2021)

  • Economic Context: Biden's presidency began amid the COVID-19 pandemic, with significant economic disruptions and subsequent recovery efforts.
  • Stock Markets: Broad positive performance driven by vaccine rollouts, economic stimulus, and infrastructure plans. The tech sector, in particular, benefited significantly, with companies like Apple, Microsoft, Amazon, and Tesla seeing substantial gains. These companies thrived due to increased demand for digital services and products during the ongoing pandemic and the broader digital transformation.
  • Gold: Gold prices dropped in 2021 primarily due to the Federal Reserve signaling potential interest rate hikes, which strengthened the U.S. dollar and reduced the appeal of gold. Additionally, as the economic outlook improved, investors shifted towards riskier assets, further diminishing demand for gold.
  • WTI (Crude Oil): Notable increases due to a rebound in global economic activity as COVID-19 vaccination rates increased and restrictions were lifted, leading to a surge in demand for petroleum products. Additionally, supply constraints from OPEC+ production cuts and disruptions in U.S. oil production further tightened the market, driving prices higher.
  • U.S. Treasuries: Fell in 2021 primarily due to rising inflation expectations and the Federal Reserve's actions. As the economy recovered from the COVID-19 pandemic, inflation fears grew, leading investors to demand higher yields to compensate for the reduced purchasing power of future interest payments. Additionally, the Federal Reserve began signaling a reduction in its asset purchase program, commonly known as tapering, which further pushed yields higher. The combination of expected inflation and the Fed's shift in policy stance made Treasuries less attractive compared to other investments.

Republican Presidents

George W. Bush (2001, 2005)

  • Economic Context: Bush's presidency saw the aftermath of the dot-com bubble burst and the September 11 attacks, leading to economic challenges and market volatility.
  • Stock Markets: Mixed performance, with significant declines following the 2001 attacks and the dot-com crash, but recovery in later years.
  • Gold: Performed well as a safe-haven asset during times of uncertainty.
  • WTI (Crude Oil): Strong positive performance in 2005 due to geopolitical tensions and supply concerns.
  • U.S. Treasuries: Generally stable with positive performance due to safe-haven demand.

Donald Trump (2017)

  • Economic Context: Trump's presidency focused on tax cuts, deregulation, and trade policies, which influenced market performance.
  • Stock Markets: Benefited from optimism from tax cuts although trade tensions with China increased. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all recorded their best annual performance since 2013. Notably, the tech sector saw significant gains, with companies like Apple, Amazon, and Facebook leading the way. The Dow Jones Industrial Average rose by about 24%, the S&P 500 by around 19%, and the Nasdaq by approximately 28%, reflecting broad-based strength across major indices.
  • Gold: Tended to perform well, reflecting geopolitical uncertainties and trade tensions.
  • WTI (Crude Oil): In 2017, WTI crude oil prices experienced significant gains, ending the year at around $60 per barrel, the highest end-of-year price since 2013. Oil performance was driven by OPEC's production cuts, robust global demand, and record-high U.S. crude oil exports driven by competitive pricing.
  • U.S. Treasuries: Mostly flat due to balanced factors of strong economic growth and low inflation. Despite robust GDP growth and improved corporate earnings, inflation remained subdued, which kept the Federal Reserve's interest rate hikes gradual and modest. This balance between positive economic indicators and controlled inflation contributed to the stability of Treasury yields throughout the year
Bar chart illustrating market performance in the year following U.S. elections, comparing Democratic (Blue) and Republican (Red) presidents from 1993 to 2021. The chart includes performance metrics for Gold, WTI, U.S. Treasuries, NASDAQ, S&P, Russell 2000, and Dow Jones. Notable trends show varied performance across different market indicators during different presidential terms, with some sectors experiencing gains while others face losses. Red and blue shading highlight periods of Republican and Democratic presidencies respectively.

Market Expectations for 2025 under Democratic and Republican Leadership

Based on the current macroeconomic backdrop and historical findings, here's what we can expect in 2025 after a Democratic or Republican president wins the presidency in November 2024:

Democratic President Wins:

  • Stock Markets: Expect positive performance. Historically, stock markets tend to perform well in the first year of a Democratic presidency. Major indices such as the Russell 2000 and NASDAQ often show stronger gains. Given the current high levels of indices like the Nasdaq and S&P, a continuation of positive performance can be expected, especially if fiscal stimulus measures are implemented for lower income earners.
  • Gold: Stable or declining prices. Gold prices might stabilize or decline slightly. With a Democratic president, improved economic stability and reduced inflation fears could lead to decreased demand for gold as a safe-haven asset. Historically, gold tends to peak during times of economic uncertainty, which may not be as pronounced under Democratic leadership.
  • WTI (Crude Oil): Moderate performance. WTI crude oil may experience stable to moderate gains. While Democratic policies might focus on renewable energy, short-term demand for oil driven by economic recovery could keep prices stable or slightly higher.
  • Bond Markets: Stable yields. U.S. Treasuries might experience stable yields. Democratic presidencies often pursue policies that maintain economic stability, which could result in modest changes in interest rates and a balanced performance in the bond markets.

Republican President Wins:

  • Stock Markets: Mixed performance. Certain sectors, particularly energy and industrials, may benefit from deregulation and pro-business policies. However, given the current high valuations, there might be increased volatility as investors become cautious.
  • Gold: Potential for higher prices. Historically, gold has seen positive performance during Republican presidencies, particularly in times of economic uncertainty or geopolitical tension. If market uncertainty increases, gold could rise as a safe-haven asset.
  • WTI (Crude Oil): Stronger gains. WTI crude oil might see significant gains. Republican policies often favor fossil fuel industries, leading to increased production and possibly higher prices driven by reduced regulation and support for domestic oil production.
  • Bond Markets: Mixed performance. U.S. Treasuries could experience varied performance. While safe-haven demand might increase, leading to stable or slightly lower yields, economic policies that boost growth might also result in a higher neutral interest rate, which could pressure on long-term Treasuries.

Quarterly Outlook

01 /

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.