With the 2020 election coming up in around a month a lot of investors may wonder how a republican vs a democratic government will impact your investments. Looking at history it tells us that the economy suffers especially when there is no control on either side. When the government is split, that is particularly worse than either a republican and democrat controlled government.
Looking at history it shows us the breakdown, since 1947. See below for more context
Republican Control – 12.9% Gain – Looking at the average 401K balance of nearly $100K if you were only invested during this time you would have seen gains of $12,900
Democrat Control – 9.8% Gain – Looking at the same scenario as above you would have only seen gains of $9,800, which is still a gain, but $2,100 less than a republican controlled government.
Split Control – 7.8% Gain – Using the same scenario as above this will be the situation where you would have seen the largest degradation. In this scenario you would have only seen $7,800 in gains, which is $2,000 less than a democratic controlled government and $4,100 less than a republican controlled government
Looking at all of these different scenarios as we know the history is not a forecast tool for the future, but it does give us a glimpse into what markets have done over the last 70 years. There are plenty of different market factors such as wars, oil, pandemics and many other situations that also affect market outcomes.
With the two candidates running in 2020 how do they actually stack up when it comes to the economy?
Infrastructure – Both candidates want infrastructure bills in excess of 1 trillions dollars though they vary in spending. The main difference is democrats want more COVID relief and their bill will focus on climate change.
Taxes – Republicans want to expend the tax changes individuals saw in 2017 whereas democrats want to decrease taxes for those making less than $400K while increasing taxes for the top 1% of earners.
Healthcare – Republicans want to cut spending for Medicare and Medicaid customers, while democrats want to create a universal healthcare option while also lowering the Medicare age to 60.
Trade – Both have a similar approach to trade, though they differ on how to do so. They both would like to decrease the US trade deficit, though republicans want to take a strong-arm approach whereas democrats want a coalition with other international allies to pressure China into reducing exports.
Jobs – The big difference here is that democrats want a universal $15 minimum wage in which republicans do not support.
Climate – This is one area where republicans and democrats differ. Republicans in this area tend to not listen to science and have put little effort into making climate change adjustments. Democrats want to move towards the US being carbon neutral by 2050. This is one area where republicans are failing.
Student Debt – Republicans want to adjust the current system where students will continue to pay student debt, but with a better system to payments and interest rates. Democrats want to forgive student debt for lower earning graduates and making tuition free for community colleges. This is one portion that doesn’t match up for the democrats. This system would cost trillions of dollars per year, which is not possible without raising taxes. Student debt is becoming a major issue that needs to be solved. It has increased four-fold in the last 15 years.
With all of this being said be sure to do your own research and don’t just vote for a specific party just because you have always been associated with that party. Look at the issues and know the differences. You wouldn’t take a test without studying first, so don’t vote without looking at the candidates and the issues. All of your beliefs won’t match either candidate, but pick the one you are mostly aligned with.
Here is a quiz to help you decide how to vote:
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