Does it really matter who ends up in the White House?

Whoever wins the US election – be it Joe Biden or Donald Trump – is likely to spend piles of money to drive the recovery from Covid-19.

Donald Melania Trump
Donald Trump: a low bar, but he beat it
(Image credit: © Chip Somodevilla/Getty Images)

When Donald Trump was elected four years ago, one of the most memorable quotes of the day came from Nobel Prize-winning economist Paul Krugman. Writing in The New York Times in the immediate aftermath, at a time when futures trading indicated that markets were set to plunge, Krugman confidently stated: “If the question is when markets will recover, a first-pass answer is never”. Since that day, the US stockmarket – as measured by the S&P 500 index – has gained about 60%. Indeed, if you’d bought the index on election day, you’d have spent virtually no time at all in the red. So much for “never”.

You can take quite a few useful lessons from this. One – don’t listen to hopelessly partisan people, even when they claim to be experts. Two – it often pays to bet against the conventional wisdom and the stronger the convictions behind that wisdom, the bigger the pay-off. It’s easy to forget now, but Krugman’s view was not at all unusual prior to Trump’s election. Virtually everyone thought that Hillary Clinton would win and most people found the idea of a Trump victory inconceivable. The idea that markets would rally that very day, let alone spend most of the next four years going up (barring a global pandemic), would have seemed outlandish, even to those without strong views on the election outcome. As it turns out, whatever else Trump did or did not do (we look at his record so far this week), the most catastrophic predictions for his time in office have not come to pass. Yes, it was a low bar to beat – but that’s the point.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.