If Biden Is Elected, Here’s What You Should Do With Apple, Microsoft and Other Tech Stocks
While the president of the United States has no official control over how the stock market performs, there’s no denying that the policies a president endorses can affect stock prices. Trade policies, tax changes and even passing comments made in speeches for political gain can get investors nervous about certain sectors.
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Over the long run, earnings do drive stock prices, but over the short term — such as the four- or eight-year run of a particular president — certain industries can and do outperform others. This is why regardless of your political preference, it’s important as an investor to understand who is in office and what that person stands for.
How big tech stocks like Apple and Microsoft are affected is particularly important, as they alone comprise nearly 13% of the entire market value of the S&P 500 index.
Here’s a look at how tech stocks have done under President Joe Biden and what the implications might be for Apple, Microsoft and other tech stocks if he wins a second term.
How Have Tech Stocks Performed Under Biden?
For purposes of this analysis, “tech stocks” are represented by the Technology Select Sector SPDR Fund, an ETF with the trading symbol XLK. This $67 billion ETF tracks only tech stocks, including those in the following industries: technology hardware, storage and peripherals; software; communications equipment; semiconductors and semiconductor equipment; IT services; and electronic equipment, instruments and components.
This differentiates it from the Nasdaq 100 index, which while often used as a proxy for “technology stocks” actually includes a large number of non-tech stocks.
The XLK closed at $128.26 on Jan. 20, 2021, the day Biden was inaugurated. With a close of $211.02 on March 13, 2024, that tech index has posted a profitable return of 64.5% since Biden took office.
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How Does This Compare With Trump’s First Term?
The XLK closed at a price of $45.92 on Jan. 20, 2017, the day Donald Trump was inaugurated. On the day he handed over the reins to President Biden, Jan. 20, 2021, the index sat at $128.26. That amounts to a gain of 179%, which nearly triples the performance of the XLK during Biden’s tenure.
Biden still has 10 months left in his presidency, but the performance difference is so great that it’s unlikely Biden can make it all up in less than one year.
So, What Should You Do With Apple, Microsoft and Other Tech Stocks if Biden Is Elected to a Second Term?
It’s important to note that while presidents certainly can have an effect on the stock market, they are just one of many influences. Earnings, interest rates, inflation, geopolitical turmoil and many other factors can impact the market even more than what a president says or does.
While Republicans traditionally have the reputation as being more “business friendly,” some analysts think Trump might actually be more of a drag when it comes to tech in 2024. This is because China is so important to technology stocks, and Trump has a passionate anti-China policy when it comes to significant policies like tariffs.
As Portfolio Wealth Advisors president Lee Munson told Yahoo Finance Live, “Biden has not been friendly to China, but Trump’s going to be even worse.”
Taking the analysis one step further, Munson noted, “When you look at Trump, he’s mercurial and could just cut off the tap … and tell Nvidia they can’t sell anything.”
In other words, tech companies have at least an understanding of what they need to do to perform under a Biden presidency; but, if he were to lose, policies under Trump might be more unpredictable.
As to which direction tech stocks might take under a second Biden term, there are mixed signals. Analysts at TD Securities note that Biden is more likely to keep taxes higher than Trump, which could hinder corporate profits.
Countering that, however, is the fact that interest rates are likely to fall in late 2024 and into 2025, as the Fed has already announced that it intends to cut rates at least three times. Combined with falling inflation, those could both be tailwinds for stocks, especially rate-sensitive tech stocks.
With all of these conflicting factors, perhaps it’s best to simply follow the advice of famed billionaire Warren Buffett, the “Oracle of Omaha.”
In his 2016 address to his Berkshire Hathaway shareholders, Buffett said, “In my lifetime, GDP per capita in real terms has gone up six for one. … I’m confident that 20 years from now there will be far more output per capita than there is now. No presidential candidate or president is going to end that. They can shape it in ways that are good or bad, but they can’t end it.”
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This article originally appeared on GOBankingRates.com: If Biden Is Elected, Here’s What You Should Do With Apple, Microsoft and Other Tech Stocks
