2020 US Presidential Election - Fidelity Investments
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2020 US Presidential Election 10 TRUTHS NO MATTER WHO WINS
Markets Have Performed Well Under Both Parties
2
Presidential term stock market returns vs. economic growth (1957-present)
25
20 Obama Ford
Clinton
Annualized Stock Market Performance %
Reagan
15
Eisenhower
Johnson
10 Bush Trump
Carter
5 Kennedy
0
Nixon
-5
G.W. Bush
-10
1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Annualized Real GDP Growth During Presidential Term %
Sources: Haver, Invesco, 3/31/20. Note: President Trump data from 1/31/17-3/31/20. Stock market performance is defined by the total return of the S&P 500 Index. Index definitions can be found on page 12. Past performance does not
guarantee future results.Investors Are Better Off Staying Fully Invested
3
Growth of $10,000 in the Dow Jones Industrial Average since 1896
Only Invested for Dems Only Invested for Reps Fully Invested
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
1924
2012
1900
1904
1908
1912
1916
1920
1928
1932
1936
1940
1944
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2016
Sources: Haver, Invesco, 12/31/19. For illustrative purposes only. Index definitions can be found on page 12. Past performance does not guarantee future results.We Do Not Radically Reengineer the US Economy
4
Breakdown of Major Components of GDP as a % of Total Spending In the United States Since 1947
Government Expenditures Business Investment Consumption
100%
50%
0%
1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019
1965 1981 1996 2010
Great Society Economic Recovery Personal Responsibility Affordable
(Medicare, Medicaid) Tax Act and Work Opportunity Care Act
Act
Dow Jones Industrial Average Total Return Index (Growth of $100) 1981
1,000,000 Economic Recovery
1965 Tax Act
100,000 Great Society Dow Jones Industrial
(Medicare, Medicaid) Average Index Returned
10,000 10.2% annualized from
1,000 1996 1926-2019
Personal Responsibility
2010
100 and Work Opportunity Affordable
Act Care Act
10
1948
1995
1926
1929
1932
1935
1937
1940
1943
1946
1951
1954
1957
1959
1962
1965
1968
1970
1973
1976
1979
1981
1984
1987
1990
1992
1998
2001
2003
2006
2009
2012
2014
2017
Sources: Bloomberg, L.P., FRED, 12/31/19. Index definitions can be found on page 12. Past performance does not guarantee future results. Scale is logarithmicThe Historical Narrative Is Not as You Remember It
5
President Jimmy Carter and Jobs President Reagan and income gains
Nonfarm payrolls Average weekly earning growth
Total employed (thousands)
Actual Job Gains Post-WW2 Average Median Weekly Earnings Trend
120
170,000
Indexed to 100
115
165,000 110
105
160,000 100
95
Dec 1980
Jun 1981
Dec 1981
Jun 1982
Dec 1982
Jun 1983
Dec 1983
Jun 1984
Dec 1984
Jun 1985
Dec 1985
Jun 1986
Dec 1986
Jun 1987
Dec 1987
Jun 1988
Dec 1988
155,000
150,000
Dec 1976
Apr 1977
Aug 1977
Dec 1977
Apr 1978
Aug 1978
Dec 1978
Apr 1979
Aug 1979
Dec 1979
President Barack Obama and inflation President Trump and business investment
CPI trend vs. actual Capital expenditures
Indexed to 12/31/16 = 100
Indexed to 12/31/08 = 100
Actual CPI Trend CPI Actual Long-term Trend
140 120
130 115
120 110
110 105
100
100
Mar 2017
Mar 2018
Mar 2019
Dec 2016
Jun 2017
Dec 2017
Jun 2018
Dec 2018
Jun 2019
Sep 2017
Sep 2018
Sep 2019
Dec Dec Dec Dec Dec Dec Dec Dec Dec
2008 2009 2010 2011 2012 2013 2014 2015 2016
Sources: Bureau of Economic Analysis, Bureau of Labor Statistics and Haver Analytics, 12/31/19. Note: Long-term trends are all averages since the end of World War II in 1945 except for Median Weekly Earnings, which is an
average of the change since 1971, when data collection began on that statistic.Signature Legislation Is Infrequent and Its Impact Often Unexpected
6
Example 1: Patient Protection and Affordable Care Act
Employers with 50 or more full-time employees are considered “large business” and therefore required to offer
employee health coverage or pay a penalty.
Nonfarm private medium payroll employment (50–499)
48000 ACA Signed GOP wins majority in House
(03/23/10) of Representatives
(11/02/10)
43000 8.6M Jobs added by medium-
sides firms since 03/2010 (39%
of total)
38000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Example 2: Tax Cuts and Jobs Act of 2017
Section 179 allows taxpayers to deduct the cost of certain property (such as machinery and equipment purchased for use in trade or business) as an expense when the property is
placed in service.
US capital goods new orders (nondefense ex-aircraft & parts) Tax cuts Signed
25 (12/22/17)
Average
5
-15 Democrats win majority in
House of Representatives
-35 (11/21/18)
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sources: Bloomberg, L.P., FRED, 12/31/19. Index definitions can be found on page 12. Past performance does not guarantee future results.Predictions Tend to Be Wrong
7
Nominal US 10-Year Yield
Average 10-Year yield: Average 10-Year yield:
2.45% (2008-2016) 2.29% (2016-2020)
4
3
Yield %
2
1
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Yield
2008-2016 2016-2020
Cumulative Performance %
80%
Russell 1000 Growth Russell 1000 Value 70%
250 60%
200 50%
40%
150
30%
100
20%
50
10%
0 0%
Cumulative Return Cumulative Return
Sources: Bloomberg L.P., Russell, 4/30/20. Index definitions can be found on page 12. Past performance does not guarantee future results.Monetary Policy Matters More
8
Financial conditions and S&P 500 performance during easing conditions
S&P S&P S&P
+227% +99% +217%
105
104
Financial Conditions
103
102
101
100
99
98
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sources: Goldman Sachs, Bloomberg L.P., 4/30/20. See index definitions on page 12. An investment cannot be made in an index. Past performance does not guarantee future results.Markets Don’t Care If You Don’t Like Who’s President
9
Gallup poll presidential approval ratings and the growth of $100,000
Log Scale
100 % $3,500,000
Gallup approval poll numbers
$3,000,000
Growth of $100,000
80
$2,500,000
60 $2,000,000
40 $1,500,000
$1,000,000
20
$500,000
0 $0
1961 1963 1969 1974 1977 1981 1989 1993 2001 2009 2017
Presidential Approval Rating Gain/Annum % of Time
>65 5.4% 13.9%
50-65 4.2% 36.2%
30-50 15.3% 36.8%No, This Is Not the Most Vitriolic Election
10
Newspaper Laments A Deadly Duel
Even though early presidents were staunch defenders of a free press, While political debates and sound bites make for
they still were upset by newspaper coverage. contentious TV today, fortunately, nothing in
recent memory compares to the personal
vendetta between sitting vice president Aaron
George Washington Burr and former treasury secretary Alexander
Newspapers filled “with all the invective Hamilton that led to a duel with pistols.
that disappointment, ignorance of facts,
and malicious falsehoods could invent to
misrepresent my politics.”
Thomas Jefferson
“Nothing can now be believed which is
seen in a newspaper. Truth itself becomes
suspicious by being put into that polluted
vehicle.”
All quotes are in the public domain.Don’t Take Punditry as Objective Market Analysis and Focus on a Key
Indicator 11
Unemployment Plus Inflation
Misery Index
25 Incumbent
20 Lost
Incumbent
Incumbent Incumbent
Lost Incumbent
15 Lost Lost
Lost
10
5
0
1961 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1998 2001 2004 2007 2010 2013 2016 2019
US Stock Market Performance
Dow Jones Industrial Average Index S&P 500
Index Levels
30000 3500
25000 3000
2500
Index Level
20000
2000
15000
1500
10000 1000
5000 500
0 0
2008 2010 2012 2014 2016 2018
Sources: Bloomberg L.P., Haver Analytics, S&P, as of 4/30/20. Past performance does not guarantee future results.12
Index Consumer Price Index (CPI) program produces monthly data on changes in the prices paid by urban consumers for a
representative basket of goods and services.
Definitions The Dow Jones Industrial Average is a price-weighted index of the 30 largest, most widely held stocks traded on the New York
Stock Exchange.
The S&P 500 Index is a market-capitalization-weighted index of the 500 largest domestic US stocks.
The Russell 1000 Value is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index
is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Russell 1000 Growth is an unmanaged index considered representative of large-cap growth stocks. The Russell 1000 Growth
Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Misery Index is an economic indicator calculated by adding the current unemployment rate and the inflation rate.
Indexes are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only
and does not predict or depict the performance of any investment. Past performance does not guarantee future results.13
Important These views represent the opinions of the authors and are not intended as investment advice or as a prediction of the
performance of any investment. These views are as of the open of business on December 31, 2019, and are subject to change on
the basis of subsequent developments. Forward-looking statements are not guarantees of future results. They involve risks,
Information uncertainties and assumptions, there can be no assurance that actual results will not differ materially from expectations.
Equities are subject to market risk and volatility; they may gain or lose value. Fixed income investing entails credit and interest
rate risks. Bonds are exposed to credit and interest rate risk. When interest rates rise, bond prices generally fall, and a fund’s
share prices can fall. Foreign investments may be volatile and involve additional expenses and special risks, including currency
fluctuations, foreign taxes and geopolitical risks. Emerging and developing markets may be especially volatile. The mention of
specific countries, currencies, companies, or sectors does not constitute a recommendation by any particular fund or by Invesco.
This material is provided for general and educational purposes only, is not intended to provide legal or tax advice, and is not for
use to avoid penalties that may be imposed under US federal tax laws. Invesco is not undertaking to provide impartial investment
advice or to provide advice in a fiduciary capacity. Contact your attorney or other advisor regarding your specific legal, investment
or tax situation.
The information provided in this communication is solely for educational purposes and should not be construed as advice or an
investment recommendation. Fidelity Investments is a separate company, unaffiliated with Invesco Distributors, Inc. There is no
form of partnership, agency affiliation, or similar relationship between Invesco Distributors, Inc. and Fidelity Investments, nor is
such a relationship created or implied by the information herein. Fidelity Investments has not been involved with the preparation
of the content supplied by Invesco Distributors, Inc. and does not guarantee or assume any responsibility for its accuracy or
completeness.
ARE NOT FDIC INSURED ARE NOT BANK GUARANTEED MAY LOSE VALUE
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