Does the President REALLY Matter for the Stock Market?

Summary

The video debunks the myth that the U.S. president significantly influences the stock market, showing that the S&P 500 consistently rises by about 50% regardless of who's in office. Data from Clinton, Obama, Trump, and Biden's presidencies all show similar market growth patterns. The real driving force behind market trends is global liquidity, not political leadership. As the video explains, investors should focus on liquidity cycles and seek faster-growing assets, like technology and Bitcoin, instead of being swayed by elections when planning long-term investment strategies.

Takeaways

• 📊 The belief that the stock market's performance is heavily impacted by who is in the Oval Office may be one of the biggest myths in finance. Historical data shows that the market tends to perform similarly regardless of the president.
• 📈 From 1993 onward, under both Democratic and Republican presidents (Clinton, Obama, Trump, and Biden), the S&P 500 has consistently risen by about 50% over the first 3 years and 8 months of each president's term.
• 🤔 Major differences in policies like taxation or social programs do not appear to significantly alter market performance; the market has gone up during high and low tax periods alike.
• 💵 What really drives the stock market isn't presidential policies, but global liquidity, meaning the amount of money circulating in the global economy.
• 🖋️ Regardless of U.S. tax policy, the percentage of GDP collected by the government tends to stay around 18%, meaning changes in tax rates have limited influence on overall revenue.
• 🌍 Central banks around the world, not just the U.S. Federal Reserve, are key drivers of global liquidity, and their actions impact markets everywhere.
• 🚀 Markets follow predictable cycles tied to liquidity. Specifically, global liquidity cycles last around four years, often aligning with U.S. presidential cycles.
• 🏠 Housing prices and the stock market both move in lockstep with the money supply, meaning that increases in liquidity are what's pushing prices up, not just asset value appreciation.
• 🔄 The rise in liquidity creates opportunities, but it's essential to choose the right 'boats' (assets) to maximize gains, as some assets perform better than others during these liquidity cycles.
• 📉 Instead of focusing on elections, investors should follow long-term trends, particularly liquidity cycles, and choose assets with the best sensitivity to monetary inflation, such as Bitcoin and technology stocks.

Q & A

What is the common myth about presidential elections and their effect on the stock market?

A common myth is that presidential elections significantly impact the stock market, with many people believing that one candidate's victory could either greatly boost or devastate the market. However, data shows that the market tends to perform similarly, with about a 50% rise, regardless of who is in the Oval Office.

How has the S&P 500 performed historically during different presidencies?

From Bill Clinton to Joe Biden, the S&P 500 has consistently risen by approximately 50% in the first 3 years and 8 months of each presidency. This trend holds across Democratic and Republican administrations, with minimal difference in overall market performance.

If the president doesn't directly influence the stock market, what does?

The primary driver of the stock market is global liquidity, particularly the money supply managed by central banks like the Federal Reserve, the Bank of Japan, and the European Central Bank. As liquidity increases, more money chases the same number of assets, driving up prices.

How does global liquidity impact the stock market?

The stock market, specifically the S&P 500, moves almost in lockstep with global liquidity. As the money supply grows, so does the market. This is because an increase in liquidity means more money is available to invest, leading to higher demand for stocks and driving their prices up.

Why is it said that tax policies have little effect on the market's overall performance?

Regardless of whether taxes are high or low, the government's tax revenue remains about the same as a percentage of GDP, roughly 18%. This is because higher taxes tend to decrease economic activity, while lower taxes increase it. Therefore, tax policies have a minimal net effect on the overall market.

What historical pattern links the four-year presidential cycle with market trends?

The four-year presidential cycle coincides with other cyclical economic factors, including global liquidity cycles and business cycles. These overlapping cycles create a predictable pattern where the market rises for three years, followed by a down year, regardless of who is president.

What role do central banks play in influencing the stock market?

Central banks, such as the Federal Reserve, play a crucial role by adjusting the money supply. Their actions, such as printing money or adjusting interest rates, significantly affect global liquidity, which in turn drives stock market performance. This is a stronger factor than presidential policies.

What is the 'Monetary Codex' mentioned in the script?

The 'Monetary Codex' refers to the understanding that in a debt-based monetary system, the debt must continuously grow to avoid deflation. This system leads to cycles of increasing liquidity, which correlates with stock market trends. Following this roadmap helps investors predict market behavior better than focusing on politics.

Why do housing prices follow a similar trend to the stock market?

Housing prices, like the stock market, follow the growth of the money supply. As more money enters the economy, the prices of real estate rise in response to increased demand, mirroring the rise in the stock market due to more available capital chasing limited assets.

How should investors approach market predictions in light of this information?

Investors should focus less on political events like elections and more on global liquidity and economic cycles. By understanding the influence of central banks and liquidity trends, investors can make more informed decisions, choosing assets with the highest sensitivity to liquidity, such as technology stocks, Bitcoin, and gold.