Wall Street has experienced a remarkable year, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite gaining 19%, 27%, and 31% respectively since the start of the year. The two-year bull market has been driven by various factors, including the artificial intelligence revolution and strong operating results from influential businesses.
However, investors should be cautious as President-elect Donald Trump prepares to take office in January. A study found that Republican presidents have overseen 13 recessions since 1913, with every single one experiencing a recession during their tenure. This correlation is worrisome for Wall Street.
Ominous warnings are mounting, including the largest year-over-year decline in M2 money supply since the Great Depression and the longest yield-curve inversion on record. Historically flawless valuation measures, such as the S&P 500’s Shiller price-to-earnings ratio, have also reached high levels that have preceded declines.
Despite these concerns, history suggests that patient investors will ultimately prevail. Since World War II, the U.S. has worked its way through a dozen recessions, with nine being resolved in less than a year. Long-term economic expansions and the stock market have consistently produced positive returns over extended periods. Analysts at Crestmont Research found that all 105 rolling 20-year periods of the S&P 500 produced a positive total return, regardless of which party controlled the White House.
As markets continue to hit record highs, patient investors are well positioned for success despite potential economic and stock market turbulence during President-elect Trump’s second term.
Source: https://www.fool.com/investing/2024/12/08/history-offer-ominous-warning-donald-trump-victory