Trump vs. Biden: Who’s Actually Better for Stock Market Investors?

Market history tells us stocks almost always go up, no matter who’s in the White House.

Over the last 75 years, the S&P 500 has finished higher through every presidential term except for Richard Nixon’s second term, which Gerald Ford completed for him, and under George W. Bush, who inherited the dot-com bust and faced the 9/11 terrorist attack. 

With just over 100 days until the November election, the benchmark index under Joe Biden is indeed on track to finish higher than it was on his inauguration day. He took office as equities were recovering from the COVID-19 shock. 

The index also climbed with Donald Trump at the helm from 2017 to 2021, and he oversaw a sharp crash at the onset of the pandemic. 

Trump would often point to the stock market as one metric of his success as president. Yet he and Biden have both overseen a nearly identical 43 percent return in the S&P 500 through 885 trading days.

To be clear, stocks are neither the best gauge for the health of the economy nor the success of a president. However, the majority of Americans hold equities in their retirement accounts, so sentiment does turn higher when stocks do well. 

It’s easier to be optimistic when you have a ballooning portfolio, so it’s taken as a bullish signal for the incumbent commander-in-chief.

That said, market performance under Trump and Biden diverges once you adjust by market capitalization and sector.

While Biden has presided over investors’ exuberance for Magnificent Seven stocks and artificial intelligence innovations, the technology sector actually fared much better under Trump.

The Nasdaq Composite saw roughly triple the returns under Trump compared to his successor three and a half years into the term.

Meanwhile, small-cap stocks also performed better under Trump. The Russell 2000 notched a 10 percent gain under his presidency, above the two percent seen during Biden’s tenure so far. 

That’s led some analysts to view the July small-cap rotation as one component of the Trump trade.

Now, the gaps in market performance are not necessarily because of Trump or Biden’s policies. Generally, a Republican White House favors less regulation and lower taxes compared to a Democratic White House. 

Stocks tend to go up in both scenarios. 

In any case, entities like the Federal Reserve have more influence over investors than the president. A president may like to take credit for a raging bull market, but they are just as likely to shirk blame when equities underperform. 

And even though the person inside the Oval Office doesn’t influence the market that much, the market’s performance can influence investors’ perception of the president. 

Luckily for investors, bull markets have reigned for most of the last several decades.