2020 US Presidential Election - Invesco
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This marketing document is exclusively for use by Professional Clients, Financial Advisers, Qualified Investors and Qualified Clients/Sophisticated Investors. This is not for consumer use, please do not redistribute. 2020 US Presidential Election 10 TRUTHS NO MATTER WHO WINS
Markets Have Performed Well Under Both Parties
2
Presidential term stock market returns vs. economic growth (1957-present)
25
20 Ford
Annualized Stock Market Performance %
Obama Clinton
Reagan
15
Bush Eisenhower Carter Johnson
10
Trump
Kennedy
5
0
Nixon
-5
G.W. Bush
-10
1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%
Annualized Real GDP Growth During Presidential Term %
Sources: Haver, Invesco, 6/30/20. Note: President Trump stock market performance data from 1/20/17-6/30/20., real GDP data from 12/31/2016 to 3/31/2020 as GDP is reported with a lag. Stock market performance is defined by the total return of the S&P 500
Index. Index definitions can be found on page 12. Past performance does not guarantee future results.Investors Are Better Off Staying Fully Invested
3
Growth of $10,000 in the Dow Jones Industrial Average since 1896
Only Invested for Dems Only Invested for Reps Fully Invested
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
1900
1904
1908
1912
1916
1920
1924
1928
1932
1936
1940
1944
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
2020
Sources: Haver, Invesco, 6/30/20. For illustrative purposes only. Index definitions can be found on page 12. Past performance does not guarantee future results.We Do Not Radically Reengineer the US Economy
4
Breakdown of Major Components of GDP as a % of Total Spending In the United States Since 1957
Government Expenditures Business Investment Consumption
100%
50%
0%
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
1965 1981 1996 2010
Great Society Economic Recovery Personal Responsibility Affordable
(Medicare, Medicaid) Tax Act and Work Opportunity Care Act
Act
S&P 500 Total Return Index (Growth of $100)
100,000 1981
1965 Economic Recovery S&P 500 Index
10,000 Great Society Tax Act Returned 10.07%
(Medicare, Medicaid) annualized from
1,000 1957-6/30/2020
1996 2010
Affordable
100 Personal Responsibility and
Care Act
Work Opportunity Act
10
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
Sources: FRED, Global Financial Data, 6/30/20. Index definitions can be found on page 12. Past performance does not guarantee future results. Scale is logarithmic.Signature Legislation Is Infrequent and Its Impact Often Unexpected
5
Example 1: Patient Protection and Affordable Care Act
Employers with 50 or more full-time employees are considered “large business” and therefore required to offer
employee health coverage or pay a penalty.
Nonfarm private medium payroll employment (50–499)
24000 ACA Signed GOP wins majority in
23000 (03/23/10) House of Representatives
(11/02/10)
22000 3.4M Jobs added by
21000 medium-sized firms from
3/2010 to 12/2019
20000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Example 2: Tax Cuts and Jobs Act of 2017
Section 179 allows taxpayers to deduct the cost of certain property (such as machinery and equipment purchased for use in trade or business) as an expense when the
property is placed in service.
US capital goods new orders (nondefense ex-aircraft & parts)
Tax cuts Signed
25 (12/22/17)
Percent Change
Year over Year
Average
5
-15 Democrats win majority in
House of Representatives
-35 (11/21/18)
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sources: Bloomberg, L.P., FRED, 3/31/20. Most recent data available. Index definitions can be found on page 12. Past performance does not guarantee future results.The Historical Narrative Is Not Always as You Remember It
The Predictions Are Not Always Accurate 6
President Jimmy Carter and Jobs President Reagan and income gains
Nonfarm payrolls Median weekly earning growth
Total employed (thousands)
Actual Job Gains Post-WWII Trend Median Weekly Earnings Post-1971 Trend
120
170,000
Indexed to 100
115
165,000 110
160,000 105
100
155,000
95
150,000 1980 1981 1982 1983 1984 1985 1986 1987 198
1976 1977 1978 1979
President Barack Obama and inflation President Trump and business investment
Indexed to 12/31/08 = 100
CPI trend vs. actual
Indexed to 12/31/16 = 100
Capital expenditures
Actual CPI Post-WWII Trend Actual Post-WWII Trend
140 120
130 115
120 110
105
110
100
100
2016
2017
2018
2008 2009 2010 2011 2012 2013 2014 2015 2016
Sources: Bureau of Economic Analysis, Bureau of Labor Statistics and Haver Analytics, 3/31/20. Note: Long-term trends are all averages since the end of World War II in 1945 except for Median Weekly Earnings, which is an average of the change since
1971, when data collection began on that statistic. Capital expenditures are not yet available for 6/30/20.The Economic Environment and Market Leadership Rarely
Change 7
Nominal US 10-Year Yield
Average 10-Year yield: Average 10-Year yield:
2.45% (2009-2016) 2.25% (2016-6/2020)
4
3
Yield %
2
1
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Yield
2009-2016 2016-6/2020
Cumulative Performance %
100% 92.08%
Russell 1000 Growth Russell 1000 Value
80%
250% 223.31%
200% 176.57% 60%
150%
40%
100%
50% 20% 10.43%
0% 0%
Cumulative Return Cumulative Return
Sources: Bloomberg L.P., Russell, 6/30/20. Index definitions can be found on page 12. Past performance does not guarantee future results.Monetary Policy Matters More
8
Financial conditions and S&P 500 performance during easing conditions
S&P S&P S&P
+227% +217% A weighted average* of:
+99%
105 • riskless interest rates
• yield curve
• the exchange rate
104
• credit spreads
• equity valuations
103
Financial Conditions
102
101
100
99
98
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Sources: Goldman Sachs, Bloomberg L.P., 6/30/20. See index definitions on page 12. An investment cannot be made in an index. Past performance does not guarantee future results.Markets Don’t Care If You Don’t Like Who’s President
9
Gallup poll presidential approval ratings and the S&P 500 Index Growth of $100,000
Log Scale
100 % $6,000,000
Gallup approval poll numbers
90
$5,000,000
Growth of $100,000
80
70 $4,000,000
60
50 $3,000,000
40
30 $2,000,000
20 $1,000,000
10
0 $0
1961 1963 1969 1974 1977 1981 1989 1993 2001 2009 2017
Presidential Approval Rating Gain/Annum % of Time
>65 5.4% 13.9%
50-65 4.2% 36.2%
35-50 15.3% 36.8%No, This Is Not the Most Vitriolic Election
10
Newspaper Laments A Deadly Duel
Even though early presidents were staunch defenders of a free While political debates and sound bites make
press, they still were upset by newspaper coverage. for contentious TV today, fortunately, nothing
in recent memory compares to the personal
vendetta between sitting vice president Aaron
George Washington Burr and former treasury secretary Alexander
Newspapers filled “with all the invective Hamilton that led to a duel with pistols.
that disappointment, ignorance of facts,
and malicious falsehoods could invent to
misrepresent my politics.”
Thomas Jefferson
“Nothing can now be believed which is
seen in a newspaper. Truth itself
becomes suspicious by being put into
that polluted vehicle.”
All quotes are in the public domain.Misery Index Tends to be Better At Predictions Than Are the Pundits
11
Unemployment Plus Inflation
Misery Index
25 Incumbent
20 Lost
Incumbent
Incumbent Incumbent
Lost Incumbent
15 Lost Lost
Lost
10
5
0
1961 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1998 2001 2004 2007 2010 2013 2016 2019
US Stock Market Performance
Dow Jones Industrial Average Index S&P 500
35000 3500
In 2009, a Stanford professor claimed that
30000 3000
Index Levels
Obama’s new policies are destroying the
25000 DJIA and that they are designed to 2500
Index Level
20000 restructure the market-based economy. 2000
15000 In 2016, a billionaire NBA team owner said 1500
10000 that there was no doubt that markets will 1000
5000 fail if Donald Trump was elected. 500
0 0
2008 2010 2012 2014 2016 2018
Sources: Bloomberg L.P., Haver Analytics, S&P, as of 6/30/20. Past performance does not guarantee future results.12
Index Consumer Price Index (CPI) program produces monthly data on changes in the prices paid by urban consumers for a
representative basket of goods and services.
Definitions The Dow Jones Industrial Average is a price-weighted index of the 30 largest, most widely held stocks traded on the New
York Stock Exchange.
The S&P 500 Index is a market-capitalization-weighted index of the 500 largest domestic US stocks.
The Russell 1000 Value is an unmanaged index considered representative of large-cap value stocks. The Russell 1000
Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Russell 1000 Growth is an unmanaged index considered representative of large-cap growth stocks. The Russell 1000
Growth Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
The Misery Index is an economic indicator calculated by adding the current unemployment rate and the inflation rate.
Indexes are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative
purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee
future results.13 Risk warnings The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Important information This marketing document is exclusively for use by Professional Clients and Financial Advisers in Continental Europe as defined below, Qualified Investors in Switzerland, Qualified Clients/Sophisticated Investors in Israel and Professional Clients in Dubai, Ireland, Isle of Man, Jersey, Guernsey and the UK. It is not intended for and should not be distributed to, or relied upon, by the public. By accepting this document, you consent to communicate with us in English, unless you inform us otherwise. This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities. Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice. These views represent the opinions of the authors and are not intended as investment advice or as a prediction of the performance of any investment. These views are as of the open of business on December 31, 2019, and are subject to change on the basis of subsequent developments. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions, there can be no assurance that actual results will not differ materially from expectations. Equities are subject to market risk and volatility; they may gain or lose value. Fixed income investing entails credit and interest rate risks. Bonds are exposed to credit and interest rate risk. When interest rates rise, bond prices generally fall, and a fund’s share prices can fall. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes and geopolitical risks. Emerging and developing markets may be especially volatile. The mention of specific countries, currencies, companies, or sectors does not constitute a recommendation by any particular fund or by Invesco. For the distribution of this document, Continental Europe is defined as Austria, Belgium, Croatia, Czech Republic, Finland, France, Germany, Hungary, Italy, Liechtenstein, Luxembourg, The Netherlands, Norway, Slovakia, Spain and Sweden. Issued by Invesco Management S.A., President Building, 37A Avenue JF Kennedy, L-1855 Luxembourg, regulated by the Commission de Surveillance du Secteur Financier, Luxembourg; Invesco Asset Management, (Schweiz) AG, Talacker 34, 8001 Zurich, Switzerland; Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority; Invesco Asset Management Deutschland GmbH, An der Welle 5, 60322 Frankfurt am Main, Germany. Issued in Dubai by Invesco Asset Management Limited, PO Box 506599, DIFC Precinct Building No 4, Level 3, Office 305, Dubai, United Arab Emirates. Regulated by the Dubai Financial Services Authority. Israel: This document may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been sent. Nothing in this document should be considered investment advice or investment marketing as defined in the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 1995 (“the Investment Advice Law”). Investors are encouraged to seek competent investment advice from a locally licensed investment advisor prior to making any investment. Neither Invesco Ltd. Nor its subsidiaries are licensed under the Investment Advice Law, nor does it carry the insurance as required of a licensee thereunder. EMEA7956/2020
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