Crypto

History Offers an Ominous Warning Following President-Elect Donald Trump’s Victory — and the Stock Market May Pay the Price

2024-12-08 12:51:00

It’s been nothing short of a banner year for Wall Street and investors. As of the closing bell on Dec. 5, the ageless Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and growth-centric Nasdaq Composite (NASDAQINDEX: ^IXIC) have respectively gained 19%, 27%, and 31% year to date.

Wall Street’s two-year bull market has been fueled by a number of catalysts. For instance, the artificial intelligence (AI) revolution may provide a leap forward in growth potential for businesses. Additionally, operating results for Wall Street’s most influential businesses have, for the most part, been better than anticipated.

But the latest catalyst for the stock market is arguably the most eyebrow-raising: President-elect Donald Trump’s November victory.

Trump’s return to the White House for a nonconsecutive second term in January will very likely pave the way for less stringent banking regulations, more merger and acquisition activity, and possibly a 29% reduction in the corporate income tax rate for domestic manufacturers. The proposals laid out by the former (and incoming) president are undeniably investor-friendly.

Unfortunately, history offers an ominous warning for Wall Street and the stock market as Donald Trump prepares to take office in just over six weeks.

A professional investor using a stylus to interact with a rapidly rising stock chart displayed on a tablet.

Image source: Getty Images.

History also shows that patience consistently prevails

But there is a silver lining amid these short-term warnings. Specifically, history is a two-sided coin, and it tends to favor patient investors far more than short-term traders.

Even though Republican presidents and recessions have gone hand-in-hand for more than 110 years, an even stronger historic correlation is the nonlinearity of the economic cycle.

Since World War II came to a conclusion in September 1945, the U.S. has worked its way through a dozen recessions. Of these 12 downturns, nine were resolved in less than a year, while none of the remaining three surpassed 18 months in length. While recessions can undoubtedly be worrisome and lead to emotion-driven moves in the stock market, they’re historically short-lived.

On the other side of the coin, over the last 79 years, there have been two periods of growth that surpassed the 10-year mark. A majority of economic expansions are going to stick around for multiple years, which is why the U.S. economy and corporate earnings grow over long periods.

It’s a similar story for the stock market.

Every year, the analysts at Crestmont Research update a data set that examines the rolling 20-year total returns (including dividends) of the broad-based S&P 500 since 1900. Though the S&P didn’t come into existence until 1923, researchers were able to trace its components to other indexes prior to its inception — thus, the total returns data are back-tested to 1900.

What Crestmont Research found was that all 105 rolling 20-year periods, with end dates ranging from 1919 through 2023, produced a positive total return. In other words, if an investor had, hypothetically, purchased an S&P 500 tracking index at any point since 1900 and held that position for 20 years, they would have generated a profit every single time, regardless of which party controlled the White House during that timeline.

Even if history rhymes, once more, during Donald Trump’s second term, patient investors are well positioned for success.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

  • Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $369,349!*

  • Apple: if you invested $1,000 when we doubled down in 2008, you’d have $45,990!*

  • Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $504,097!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of December 2, 2024

Bank of America is an advertising partner of Motley Fool Money. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button