Since President Trump's election, the S&P 500 has risen by more than 25%, outpacing the early months of Bill Clinton, Ronald Reagan and George W. Bush. Barack Obama's numbers do come in much higher; stocks were spiraling out of control during election season 2008 and hit a bottom in the first 100 days of his term.
What's even better, at least for the short term, is that on average the S&P 500 index has documented a rise of 16.7% in the 12 months after a midterm election, going back to the 1940s.
Up for grabs today are 435 seats in the House of Representatives, and 35 of the 100 Senate seats. Betting markets (like the PredictIt here in Washington D.C.) have suggested that Democrats will gain control of the House, but Republicans will keep their grip on the Senate. The candidates (and many celebrities) hope to draw historic numbers at the polls.
Red or Blue, whoever wins will not be able to stop the coming market correction, with today's vote possibly sparking further volatility across the capital markets. Of course, that's because the world holds the U.S. in such a powerful position. Unfortunately, no powerful civilization ever saw its own demise. If the Democrats win the majority of Congress back, many predict Trump will be a one-term president, like Bush Senior, even if the economy continues its upward trend.
The challenge is that investors have already enjoyed one of the longest and most prosperous economies in history.
The Dow Jones Industrial Average has risen from 8,000 points in January 2009 to over 25,000 today -- that's a 212% gain. That is only beaten by the two decade-long prosperity train that was the '80s and '90s, when the Dow rose from 875 in January 1980 to nearly 12,000 points in December 1999, an impressive gain of more than 1,200%.
Dow Jones - 100 Year Historical Chart
To match that 20-year period, the Dow would have to surpass 100,000 points by the end of 2028. What that would mean in terms of inflation could be catastrophic, because the gains since 1980 did not come on the back of economic productivity alone.
A thousand dollars in 1980 is equivalent to $3,100 today. Thankfully, for those that invested that $1,000 in the S&P 500 instead of putting it under the mattress, it has grown to $30,000. However, that $30,000 only buys you the equivalent of $10,000 in goods that it would have in 1980.
Yes, we are better off, but there was a price to pay.
The reason people should invest in assets like stocks in the first place is so that their money can rise faster than inflation, and it's easier than ever to do that thanks to apps like Robinhood, WeBull and Acorns. So, while you may be thinking that this election cycle is the most important, the next one will be too and the next one and so on, ad infinitum. What matters more is not who you elect to office, but where you elect to put your money. Regardless of who's in office, no one cares more about your assets than you.
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Dollar-Cost Average in Fiat ChryslerÂ
