The US presidential debate broadcast live 
two weeks ago was a sad and sorry display. The rules of the debate – put in place by 
CNN were designed to avoid the chaos of the prior debate which were marked by heckling, 
constant interruptions, and character attacks. The new 90-minute format with no 
opening statements, timed responses, muted microphones between turns, and the 
absence of a live audience—were supposed to keep the exchange between candidates 
under control and policy-focused. [Golf Clip] That didn’t really work out…
CNN said that the moderators would “use all tools at their disposal to enforce 
timing and ensure a civilized discussion.” According to The New York Post, this 
new format was expected to favor Biden, but his performance instead left his biggest 
supporters concerned about his ability to handle the rigors of another four years in office. 
Debates can (of course) swing elections.

and this one — like Richard Nixon’s sweaty debate 
against JFK in 1960 — might go down in history as the moment Biden supporters lost all hope.
In the lead up to the presidential debate, senior Democrats had been pushing Biden to get 
out in front of the press more and put himself in unscripted situations to show what he can do.
According to AP news Biden’s halting delivery and meandering comments, particularly early in the 
debate, fueled concerns from even members of his own party that at age 81 he’s not up for the task 
of leading the country for another four years. Biden struggled to mount an effective defense of 
the economy on his watch, at one point appeared to lose his train of thought and ended an 
answer with the statement that “we finally beat Medicare.” He brought up his administration’s 
botched withdrawal from Afghanistan unprompted and repeatedly mixed up “billion” with “million.”
When he wasn’t speaking, he stood frozen

behind his podium with a confused expression 
and his mouth hanging open. According to The New Yorker, “The true locus of the President’s 
humiliation onstage was not his misbegotten words, but the sorry pictures he made with his face.”
The New York Times described Trump’s debate performance as being made up of relentless 
attacks and falsehoods, but later wrote that, “As Biden Points to His Past, Supporters 
Are More Worried About His Future.”
In the months before the debate, polls had showed 
that Donald Trump had a 1% edge on Joe Biden, but that voters overall were not happy with either 
candidate. Only 35% of those polled rated Biden’s work in office favorably. Nearly half of the 
respondents said that they were “not at all” confident in Biden’s physical or mental fitness, 
or in Trump’s ability to act ethically in office. 43% of respondents expressed a lack of confidence 
in Trump’s respect for democratic values.

It’s unusual for even one major-party candidate to be this unpopular — let alone both of them. On the day of the debate, national polling averages between Biden and Trump were tied. Since then, they have sharply diverged with Trump now holding a two-point lead. During the debate, prediction markets reacted in real time, and PredictIt - a political betting market, gave Trump a 61 per cent chance of winning by the end of the debate, having started the debate at 53 per cent. This weekend's assassination attempt on Donald Trump has possibly helped his campaign. Rob Casey, of Signum Global Advisors, wrote in a note that “The event has the potential to increase Trump’s support by highlighting his vigor, motivating his base, and eliciting sympathy.” The attack additionally makes it more difficult for The Democrats to run attack ads during the next few weeks, while Republicans can take advantage of the situation to blame fearmongering rhetoric from senior Democrats for the attack.

Considering the differences between these 
two candidates and the different sectors   that might thrive under Trump versus Biden. 
If it’s reasonable to believe that market   participants are now pricing in a Trump 
victory, how is this showing up in markets,   and should investors adjust their portfolios to 
take the changing probabilities into account?
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While some polls are showing that Biden’s poor 
debate performance has not harmed his chances, Polls in a number of swing states have tipped 
in Trump’s favor, with Michigan and Wisconsin

flipping from a Biden lead to a small Trump advantage, according to FiveThirtyEight polling averages. In Pennsylvania, where Biden spent the most on adverts, the narrowing gap between the candidates widened after the debate, with Trump taking the lead. While no new polls have come out since the assassination attempt, Trump’s odds of winning the election saw an immediate rise in betting markets. As of the time of this recording, the odds on Polymarket have risen to – almost 70%. While the track record of betting markets on the morning of an election day is excellent, they tend to fluctuate significantly based on news reports in the lead up to elections. In 1981, Ronald Reagan got a huge ratings surge after he was shot, but that boost evaporated within a few weeks as the news cycle moved on. After the assignation attempt on Saturday, people like Bill Ackmann and Elon Musk announced their endorsement of Trump – praising his

composure. Having watched the debates, 
it’s not obvious to me that Biden would   have even flinched in such a situation.
Both Biden and Trump are older than any   prior US president. Not just that, but Bill 
Clinton who took office in 1993 - 31 years ago,   George W. Bush who took office 23 years ago 
and Barack Obama who took office 15 years ago   are all younger than both Trump and Biden.
If you are looking for a young candidate – I   guess you can vote for RFK Junior – who despite 
having junior in his name is still 70 years old.
  Even before the disastrous debate performance, 
Biden’s age and general health had been   an issue with voters, and the debate only 
reinforced the public’s deep-seated concerns.
  After the debate, the Biden Family convened at Camp 
David – the president's country residence – which   was named after President Eisenhower’s grandson in 
1953. Amusingly, David Eisenhower – who it is named

after is younger than both Trump and Biden.
The scale of the crisis for the Democratic Party in the wake of the debate is hard to overstate. While there are ways for the party to replace Biden, the most likely way out is for Biden himself to decide to step aside. In such a situation, Biden would release the Democratic delegates who are pledged to him; competing candidates could then spend the weeks before the Party convention pitching themselves to delegates and the public, and the party convention would then vote on who to endorse in late August.
While Americans - used to long drawn-out election campaigns - worry that a new Democratic Party candidate would not have enough time to make their case to the voting public before the election in November, in most parts of the world elections happen much more quickly than in the United States. Rishi Sunak only called a UK election (in his rain-drenched speech) on the 22nd of May, and the vote occurred six weeks later on July the fourth. There is

still plenty of time for a new candidate to be announced and for a campaign to be run. The next big events for the US election include the formal party nomination conventions in July and August, and then a second debate in September. I initially held back on making a video on this topic as it seemed likely that a replacement Democratic Party candidate would be announced, and my video would be immediately out of date. While that still seems likely to me, Biden insisted at a press conference on Thursday at the end of a NATO summit that he was not stepping down. He said, “If I slow down [and] I can’t get the job done — that’s a sign I shouldn’t be doing it.” “But there’s no indication of that yet.” The same day, he referred to Kamala Harris, the vice-president, as “vice-president Trump” and earlier in the day called the Ukrainian leader Volodymyr Zelenskyy - “President Putin.”

In trying to understand the effects of political 
leadership on the stock market, the first good paper on this topic that I found was written 
by a friend of the channel, Victor Niederhoffer, along with Steven Gibbs and Jim Bullock in a 1970 
paper called Presidential Elections and The Stock Market. In order to test the hypothesis that 
the market prefers Republican presidents, they looked at stock market returns on the day after 
election results were announced and found that after a Republican win, the stock market rose an 
average of 1.12%, whereas after a Democrat win, the average next day return was -0.81%. They 
found that market movements during the week and month following the election were qualitatively 
similar to those the day following the election, with the stock market rising after a Republican 
victory and declining after a Democrat victory. They then looked at market returns broken down 
by year of the administration and party in power.

to see if markets performed significantly 
better during a Republican administration than during a Democratic one. They found no 
systematic differences in the performance of the market during Republican and Democratic 
administrations, meaning that there was no 
long-term pattern in market movements to 
justify Wall Street's Republican bias. The 
authors pointed out that there had only been 
eighteen Presidential elections since the 
beginning of the modern Dow-Jones Averages and that 
this was not enough for statistical significance.
Research by Trevor Jennewine looking at the S&P 
500 – since its inception in 1957 found that the 
S&P 500 achieved a median Compound average Growth 
Rate of 9.3% under Democratic presidents and 10.2% 
under Republican presidents but found that when 
he looked at yearly returns rather than returns 
over the entire presidency - the relationship 
flipped giving the Democratic party the edge.
This type of analysis might be useful when 
campaigning, (as a politician can claim that

their party is good for the stock market) but is 
not awfully useful for investors, as there is of   course a lag between policies being implemented 
and their effects on markets. Does a president get   to take credit for stock market performance 
during their first year in office, when the   market may be rising or falling due to policies 
put in place by the prior president? I think we   all know that they will take credit for a rise 
and blame the last guy if there is a decline.
  A good example of this is that republicans will 
tell you that the bad stock market performance   under President Bush was caused by Bill Clinton's 
rewriting of the Community Reinvestment Act in   1995, which put pressure on banks to lend 
in low-income neighborhoods, leading to   the credit crunch. Democrats will deny this.
While presidential policy and congressional   legislation do (of course) impact the economy, 
no single president or political party ever has

complete control. If you were to only invest in 
the stock market during Republican or Democratic 
presidencies, you would experience a major 
shortfall versus investing in the index, regardless 
of the political party in power.
So, are there industries then that outperform 
under Republican or Democrat presidents? 
Well, a 2005 paper by Stangl and Jacobsen 
of Massey University in New Zealand found 
that despite a popular belief that certain 
industries in the United States do better 
under one political party versus the other, 
adjusted industry returns show no such 
relationship exists, and differing industry returns 
are better explained by macroeconomic events.
Even if this was not the case, I don’t think there 
are many Republicans who would claim that Trump is 
a typical Republican candidate. If we compare him 
to George Bush Senior, who enlisted in the US Navy 
on his 18th birthday, becoming one of the youngest 
US Navy pilots, who then got married at age 21 
to Barbara Bush, moved to Midland, Texas, to work

as an oil field equipment salesman. Went on to 
co-found a drilling company, which made him a   millionaire before the age of 40. Bush was then 
elected to the House of Representatives, became   an ambassador, then the head of the CIA before 
becoming Vice President, and finally President. 
  There is not much overlap between a guy 
like that and Donald Trump – who led a   very different life. It’s not really reasonable 
to draw much of a line between how one of these   men might behave in office versus the other 
just because they are both Republicans.    
  There is a really interesting interview on the 
Hidden Forces podcast where Demetri Kofinas   interviewed Henry Olsen, and they discussed how 
the traditional ideas of right and left make   little sense today. I’ll put a link to it in 
the description. Olsen argues that the changes   in the meaning of right and left are not just an 
American thing; it can be seen around the world.

The terms “right” and “left” first appeared 
during the French Revolution when members of the French National Assembly divided into 
supporters of the King who sat to the president's right, and the more radical supporters of 
the revolution who sat to his left. In more recent history, the left attracted 
poorer, less educated voters who favored state intervention in the economy (to prevent the 
wealthy from taking advantage of them) and in private life, where they wanted the state 
to protect minority groups. The left were historically less interested in the use of 
force overseas too. The right – on the other hand - was made up of the wealthy and educated 
who opposed trade unions and favored small government and low taxes. This group wanted to 
see economic growth as they benefited from it. According to Olsen, working-class and lower 
middle-class voters today are more likely to vote for the populist right – people like Trump, Farage, 
and Le Pen – because state provision and control.

no longer matters for this group as neither 
political party is threatening to take away their benefits or their rights, but no one is offering 
them good jobs either. The new right are no longer traditional conservatives; they are instead 
people who are unhappy with the status quo. This group choose very different 
candidates than the old right chose.
So, what about the new left then? Well, 
economic growth really worked out for upper middle-class, college-educated people over 
the last thirty or more years. This group tends to be secular and internationally focused, and 
Olsen argues that they are drawn to the center left (not the hard left) as they feel that the 
center left represents their cultural concerns, their environmental concerns, and so on. This 
group are interested in – what are today described as - woke ideas - that are of little interest to 
the working class who used to vote for the left.
Olsen argues that we need new terms for 
these new political groupings, as while

the terms right and left – as they have been used historically - may have made sense thirty years ago, but they are mostly meaningless today. With this context, it’s not obvious that Trump or Biden necessarily represent the groups or the ideas that the Republican or Democratic Parties represented in the past, so looking at historical stock market returns through a political lens – is not really useful – as the political parties no longer represent what they used to. Back in 2000, a portfolio manager I knew bought Haliburton stock for the accounts he managed on the reasoning that the new vice president Dick Cheney had stepped down as the CEO of Halliburton, but still owned lots of stock and would possibly make decisions that were good for that company. There were plenty of allegations during the Bush presidency of Dick Cheney’s conflicts of interest and of contracts being inappropriately awarded to Haliburton, but the stock price

declined around 8 percent over Bush’s term.
The point of this story is that even if a leader has a specific wish to boost a given stock, or stock market sector, it doesn’t mean that they will be able to. A lot can happen to thwart their plans. Thus maybe it’s not worthwhile worrying too much about what politicians might want to happen.
Forbes estimates Trump’s net worth at 7.5 billion dollars, the majority of which comes from his ownership of Truth Social – a meme stock. Other than that, he has commercial real estate investments which will have struggled in recent years due to the move towards working from home and higher interest rates. He might have an urge to boost commercial real estate – but that doesn’t mean he will be able to.
So, what do the two candidates stand for, and what sectors of the economy might make big moves if the stock market started to price in a Trump presidency? Trump might be expected

to start undoing some of the legislation 
passed by Biden over the last four years.
  Bidens inflation reduction act, which contains 1.2 
trillion dollars in new spending and tax breaks   (according to Goldman Sachs), was put in place 
to boost clean energy, reduce healthcare costs,   and increase tax revenues. If elected, Trump 
might not be able to repeal the law unilaterally,   but he could possibly work to make its 
implementation more difficult by hindering   it through executive action, by tightening limits 
on tax credits, holding back some of its loans and   grants, or revising treasury department 
rules that haven’t yet been finalized.
  The IRA includes a suite of tax credits for 
carbon-friendly energy sources and electric   vehicles as part of an effort to protect 
the climate. It also includes money for   grants that subsidize climate-friendly or 
pollution-cutting projects, and a program to   punish oil and gas companies for methane leaks.
Looking at the performance of clean energy ETF’s.

in the weeks since the debate, it is not obvious 
that investors are concerned about this being unwound. The Net Zero – Paris aligned equity ETF 
is up about three percent since the debate.  
A lot of investors believe that a Trump victory 
would be good for the oil industry. If we look at the return of oil majors like Exxon Mobil, we 
can see that it is down slightly since the debate, as is the drilling equipment company Schlumberger 
which would be expected to benefit from increased fracking. Drilling contractors like H&P and 
Nabors are up a little, but nothing significant.
Chinese stocks like Ali Baba and Baidu are up 
since the debates – but I’m not sure they would be expected to do any better under Biden 
than Trump. Neither candidate is pitching themselves as being China friendly. First 
Solar, an American solar panel manufacturer who would likely benefit from increased tariffs on 
Chinese imports is up slightly since the debate,

but once again, nothing out of the ordinary.
Trump owns a lot of real estate, and so maybe he would try to boost commercial real estate values while in office. He might want to influence the Fed to lower rates – for example. When we look at the Vanguard Real Estate ETF returns, we can see that it has done well since the debate, but that could be explained by the lower inflation numbers that came out last week. Gun companies tend to do better when a Democrat is elected, as gun enthusiasts tend to stock up on firearms in fear that Democratic politicians will introduce tough new gun laws. Investors are well aware of this phenomenon, but once again we see no effect when looking at stocks like Smith and Wesson, which barely budged in the weeks after the debate. To be clear, I am looking at these stock prices over the weekend, and they will not have been impacted by the assassination attempt as of the time of this recording.

On Wall Street, the bet that Trump’s return to the White House will bring about more inflation and higher interest rates has been known as the Trump Trade in recent months. Many of Trump’s core policies lean in an inflationary direction: tariffs would push up the price of imports, a crackdown on immigration could push up wages, and deficit-financed tax cuts would juice the economy. Should these policies bring about inflation, the Federal Reserve would have to hike interest rates. While changes in the still inverted Treasury yield curve have mostly been driven by changing expectations about the Fed's first rate cut in this cycle, the gap between 2-year and 30-year notes has narrowed to a negative 6 basis points from a negative 30 bps around the time of the Biden-Trump debate. The spread between the two- and 10-year Treasury yields is at a negative 27 basis points.

half the levels three weeks ago. So bond investors 
are possibly beginning to price in a Trump win.
The magnificent six stocks have been the 
big driver of stock index returns over the last year and a half driven by a belief that 
huge profits will materialize from artificial intelligence investments made by the tech 
giants. This boom is not really related to politics. There is no reason to believe that 
Biden caused the megacap tech stock growth, or that a Trump presidency would have any 
effect on the prospects of these companies.
Part of the reason that markets may not be 
reacting to the increased odds of a Trump victory is that Trump is extremely unpredictable. In 2016 
it was widely predicted that he would be very bad for the stock market, but the stock market 
boomed during his presidency before selling off at the start of the pandemic. Investors might 
not be placing any big bets – simply because

they have no idea what he will do if elected.
Investors appear to be somewhat nervous about JD Vance, who is widely seen as a top contender for vice president under Trump. We don’t yet know who Trump’s VP will be, but Trump has described his search for a Vice President as a “highly sophisticated version of The Apprentice.” We can only hope that it is more sophisticated than a reality TV show.
[Clip]
Vance’s economic populism worries investors and the business community, as many of his policy ideas would traditionally fit squarely within the left wing of the Democratic Party. As an example, he drew headlines earlier this year for praising FTC chair Lina Khan, who is widely viewed as being anti-business. Vance is once again not a traditional Republican. 
According to Andrew Prokop at Vox, some Democrats see scaremongering over “project 2025” as the ace in the hole that could save Biden’s struggling reelection campaign. Project 2025

is a 922-page plan that was drawn up by the 
Heritage foundation and more than 100 other   conservative groups for what the next 
Republican president should do when he   takes power. Now – let's be serious – Trump is not 
going to read anything that is 922 pages long…
  Project 2025 involves concentrating power 
in the presidency and focusing on long-term   conservative policies. It was, however, drawn up 
in 2023 before Trump had won the nomination and   without his involvement. It is also - nothing new 
- as Heritage have been drawing up plans like this   to influence conservative presidents since 1980.
Trump has publicly disavowed project 2025 – saying   that he knows nothing about it. It 
is – as I mentioned 922 pages long…
  One of the biggest differences between the two 
candidates is their views on tax policy. Many   provisions of Trump's Tax Cuts and Jobs Act of 
2017 are set to expire at the end of 2025. If  

the provisions are extended by Trump, Americans 
would see lower tax rates in the coming years,   but a growing budget deficit. The Trump campaign 
is not necessarily in favor of growing the   deficit but have not explained how they plan to 
address deficit concerns. They have discussed   the possibility of additional tariffs on imported 
goods as a method of boosting revenue. Not much is   actually clear – but of the two candidates, 
Trump is pitching lower taxes than Biden.
  During his term in office, Trump implemented 
tariffs on Chinese imports, and President   Biden continued most of them, adding on additional 
tariffs. Both Trump and Biden are likely to pursue   fiscal stimulus policies to boost the economy, 
although likely with different combinations   of tax incentives and higher spending.
An FT article by Peter Spiegel from last   week describes how little American presidents 
have actually gotten done during their second   terms in office - in recent decades. Reagan and 
Clinton were bogged down by scandals – The Iran

Contra Affair and the Lewinski Affair…
George W. Bush was bogged down by an unwinnable war in Iraq, and Obama made most of his big changes during his first term too. Trump is likely to be embroiled in his ongoing legal problems should he be elected, and should Biden win, any public appearances he makes will be subjected to forensic examination for gaps in the president’s memory or any strange behavior. Any effort to shield him from the public or the press would likely be met with ferocious backlash too. Neither of these candidates are traditional presidential nominees. It is not obvious that either of them will get much done if elected either. For most investors, it probably makes sense to stay the course with any long-term investment plan they have rather than trying to predict the actions of two extremely unpredictable politicians, and then predict how these actions will impact individual stocks. Political affiliation can directly affect an

individual’s optimism for the future direction of their country or its economy. This type of partisan bias can harm an investor's objectivity, especially in a year like this that is so politically charged. As always, investors typically do best when they formulate a sensible long-term investment plan and then stick to it – harvesting the long-term returns that markets provide. If you found today’s video interesting, you should watch my video on the commercial real estate meltdown next. Don’t forget to check out our sponsor Ground News using the link in the video description. See you in the next video, bye.

Will Trump Pump the Stock Market?

Patrick Boyle is a hedge fund manager, a university professor and a former investment banker. 

This channel is all about quantitative finance. By subscribing you will see videos explaining what is happening in markets right now, you will learn about financial derivatives, corporate finance and how traders use quantitative tools like statistics. You will see interviews with some of the most interesting people in the financial industry.  In addition, you will see some longer form documentaries on the history of financial markets.

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