T. Rowe Price: Investment success is not reliant on either US political party

Nov 7, 2018

With the Democrats recapturing a majority in the House of Representatives for the first time since the 2010, will there be an impact on the economy and financial markets?

T. Rowe Price investment managers discuss the implications in the attached note and for ease, please see below for a quick snapshot of the views.

“Investors should not let the political environment weigh too heavily on their investment strategy because stocks have performed well during most presidential terms, or over longer time periods,” Larry Puglia, manager of the T. Rowe Price US Blue Chip Equity Fund, says.

“It may be tempting for investors to try to link election results to market outcomes, but there is really no consistent relationship between which party is in charge and long‑term investment success,” Eric Veiel, head of US equity at T. Rowe Price, comments.

“We are not going to see big fiscal stimulus such as tax cuts or huge spending increases because what has been done so far has already blown a big hole in the budget, and the economy is still strong,” according to Alan Levenson, chief US economist at T. Rowe Price.

“Going into 2020, investors should be more reticent of the potential for a change in administration and what that could mean for markets, the economy, healthcare, energy, defence, and merger and acquisition activity. We have had a very pro‑business, anti‑regulation, tax‑cutting administration that has been very good for the stock market. Some would argue that is why we have had such strong economic and wage growth this year. If we have a change in regime, that could reverse some of these policies and have a knock‑on effect on the economy and stock market. The market is forward-looking, so as we think about 2019 and 2020, that possibility will become a factor,” David Giroux, T. Rowe Price’s head of investment strategy, adds.