2020 US Presidential Election1 0 T R U T H S N O M A T T E R W H O W I N S
Eisenhower
Kennedy
Johnson
Nixon
Ford
Trump
Reagan
Bush
Clinton
G.W. Bush
Obama
Carter
-10
-5
0
5
10
15
20
25
1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
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.
Presidential term stock market returns vs. economic growth (1957-present)
2
An
nu
aliz
ed S
tock
Mar
ket
Per
form
ance
%
Annualized Real GDP Growth During Presidential Term %
Markets Have Performed Well Under Both Parties
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,0001
90
0
19
04
19
08
19
12
19
16
19
20
19
24
19
28
19
32
19
36
19
40
19
44
19
48
19
52
19
56
19
60
19
64
19
68
19
72
19
76
19
80
19
84
19
88
19
92
19
96
20
00
20
04
20
08
20
12
20
16
Only Invested for Dems Only Invested for Reps Fully Invested
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.
Growth of $10,000 in the Dow Jones Industrial Average since 1896
Investors Are Better Off Staying Fully Invested
3
10
100
1,000
10,000
100,000
1,000,000
19
26
19
29
19
32
19
35
19
37
19
40
19
43
19
46
19
48
19
51
19
54
19
57
19
59
19
62
19
65
19
68
19
70
19
73
19
76
19
79
19
81
19
84
19
87
19
90
19
92
19
95
19
98
20
01
20
03
20
06
20
09
20
12
20
14
20
17
0%
50%
100%
1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019
Government Expenditures Business Investment Consumption
Sources: Bloomberg, L.P., FRED, 12/31/19. Index definitions can be found on page 12. Past performance does not guarantee future results.
4
Breakdown of Major Components of GDP as a % of Total Spending In the United States Since 1947
Dow Jones Industrial Average Total Return Index (Growth of $100)
1965Great Society
(Medicare, Medicaid)
1981Economic Recovery
Tax Act
1996Personal Responsibility and Work Opportunity
Act
2010Affordable Care Act
2010Affordable Care Act
1996Personal Responsibility and Work Opportunity
Act
1981Economic Recovery
Tax Act1965Great Society
(Medicare, Medicaid)Dow Jones Industrial
Average Index Returned 10.2% annualized from
1926-2019
Scale is logarithmic
We Do Not Radically Reengineer the US Economy
150,000
155,000
160,000
165,000
170,000
Dec 1976Apr 1977Aug 1977Dec 1977Apr 1978Aug 1978Dec 1978Apr 1979Aug 1979Dec 1979
Actual Job Gains Post-WW2 Average
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.
President Jimmy Carter and JobsNonfarm payrolls
100
110
120
130
140
Dec2008
Dec2009
Dec2010
Dec2011
Dec2012
Dec2013
Dec2014
Dec2015
Dec2016
Actual CPI Trend CPI
President Barack Obama and inflationCPI trend vs. actual
95100105110115120
Dec
19
80
Jun
19
81
Dec
19
81
Jun
19
82
Dec
19
82
Jun
19
83
Dec
19
83
Jun
19
84
Dec
19
84
Jun
19
85
Dec
19
85
Jun
19
86
Dec
19
86
Jun
19
87
Dec
19
87
Jun
19
88
Dec
19
88
Median Weekly Earnings Trend
President Reagan and income gainsAverage weekly earning growth
100105110115120
Dec
20
16
Mar
20
17
Jun
20
17
Sep
20
17
Dec
20
17
Mar
20
18
Jun
20
18
Sep
20
18
Dec
20
18
Mar
20
19
Jun
20
19
Sep
20
19
Actual Long-term Trend
President Trump and business investmentCapital expenditures
5
The Historical Narrative Is Not as You Remember It
Tota
l em
plo
yed
(th
ou
san
ds)
Ind
exed
to
10
0
Ind
exed
to
12
/31
/08
= 1
00
Ind
exed
to
12
/31
/16
= 1
00
38000
43000
48000
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.
Example 1: Patient Protection and Affordable Care ActEmployers 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)
-35
-15
5
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Example 2: Tax Cuts and Jobs Act of 2017Section 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)
Signature Legislation Is Infrequent and Its Impact Often Unexpected
6
Average
Tax cuts Signed(12/22/17)
Democrats win majority in House of Representatives
(11/21/18)
ACA Signed(03/23/10)
GOP wins majority in House of Representatives(11/02/10)
8.6M Jobs added by medium-sides firms since 03/2010 (39%
of total)
0
50
100
150
200
250
Cumulative Return
Russell 1000 Growth Russell 1000 Value
Cu
mu
lati
ve P
erfo
rman
ce %
Sources: Bloomberg L.P., Russell, 4/30/20. Index definitions can be found on page 12. Past performance does not guarantee future results.
Nominal US 10-Year Yield
2008-2016 2016-2020
Predictions Tend to Be Wrong 7
Average 10-Year yield:2.45% (2008-2016)
Average 10-Year yield:2.29% (2016-2020)
0%
10%
20%
30%
40%
50%
60%
70%
80%
Cumulative Return
Yiel
d %
01234
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Yield
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.
Financial conditions and S&P 500 performance during easing conditions
Monetary Policy Matters More 8
Fin
anci
al C
on
dit
ion
s
S&P+227%
S&P+99%
S&P+217%
98
99
100
101
102
103
104
105
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
0
20
40
60
80
100
Source: Bloomberg, L.P., 12/31/19. See index definitions on page 12. An investment cannot be made in an index. Past performance does not guarantee future results.
Gallup poll presidential approval ratings and the growth of $100,000
Presidential Approval Rating Gain/Annum % of Time
>65 5.4% 13.9%
50-65 4.2% 36.2%
30-50 15.3% 36.8%
<35 -19.7% 6.6%
Markets Don’t Care If You Don’t Like Who’s President 9
Gal
lup
ap
pro
val p
oll
nu
mb
ers
Gro
wth
of
$1
00
,00
0
%
Log Scale
1961 1963 1969 1974 1977 1981 1989 1993 2001 2009 2017
All quotes are in the public domain.
Newspaper LamentsEven though early presidents were staunch defenders of a free press, they still were upset by newspaper coverage.
Newspapers filled “with all the invective that disappointment, ignorance of facts, and malicious falsehoods could invent to misrepresent my politics.”
George Washington
A Deadly DuelWhile political debates and sound bites make for contentious TV today, fortunately, nothing in recent memory compares to the personal vendetta between sitting vice president Aaron Burr and former treasury secretary Alexander Hamilton that led to a duel with pistols.
No, This Is Not the Most Vitriolic Election
10
“Nothing can now be believed which is seen in a newspaper. Truth itself becomes suspicious by being put into that polluted vehicle.”
Thomas Jefferson
0
5
10
15
20
25
1961 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1998 2001 2004 2007 2010 2013 2016 2019
Misery Index
Sources: Bloomberg L.P., Haver Analytics, S&P, as of 4/30/20. Past performance does not guarantee future results.
Unemployment Plus Inflation
0
500
1000
1500
2000
2500
3000
3500
2008 2010 2012 2014 2016 2018
0
5000
10000
15000
20000
25000
30000
Dow Jones Industrial Average Index S&P 500
US Stock Market Performance
Don’t Take Punditry as Objective Market Analysis and Focus on a Key Indicator
11In
dex
Lev
els
Ind
ex L
evel
Incumbent Lost
Incumbent Lost
Incumbent Lost
Incumbent Lost Incumbent
Lost
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.
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.
IndexDefinitions
12
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, uncertainties and assumptions, there can be no assurance that actual results will not differ materially from expectations.
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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 investmentadvice or to provide advice in a fiduciary capacity. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.
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Important Information
13
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