Stanley Druckenmiller, a renowned investor, has shared his perspective on the potential impact of the upcoming presidential election on the stock market. Over the past 50 years, the stock market has risen in 39 of those years, generating an average annual return of 11.9%. According to Ned Davis Research, from 1901 to 2024, the Dow Jones Industrial Average (DJIA) experienced an annualized gain of 8.2% under Democratic presidents compared to 3.2% under Republican administrations.
However, Druckenmiller suggests that much of this difference could be random rather than a reflection of superior economic policy by Democratic presidents. When it comes to the makeup of Congress, the results are somewhat different. Under a Democratic-controlled Congress, the DJIA has seen an annualized gain of 1.1%.
In contrast, a Republican Congress has yielded a 6.5% increase. Druckenmiller believes these results are also likely due to random variations rather than legislative excellence. Currently, some market experts believe a Trump victory has already been factored into the robust stock market.
They argue he would continue implementing business-friendly policies beneficial for stocks. Betting odds have placed Trump’s chances of winning the presidency at 56%, with the probability of a GOP majority in the Senate over 80%, and a Democratic House at around 55%. Nikolaos Panigirtzoglou, Managing Director for Global Market Strategy at JPMorgan Chase, notes that the rising probability of a Republican sweep is reflected in recent market moves.
These include stronger stock performance, particularly for banks, a stronger dollar, and higher U.S. bond yields. Druckenmiller, an ex-colleague of investment legend George Soros, acknowledges this sentiment, especially in sectors like banks and cryptocurrencies. The KBW Nasdaq Bank Index has jumped 10% in the past month, while Bitcoin has appreciated by 9%.
However, Druckenmiller warns of potential challenges ahead. He believes a Democratic sweep would likely put the stock market under pressure for three to six months due to factors such as higher taxes and lower business confidence. Conversely, if Republicans win both houses, the stock market could benefit from deregulation and heightened economic activity in the short term but might face struggles in the fixed income markets, leading to higher interest rates.
Higher interest rates can negatively impact the economy and corporate earnings, posing a long-term challenge for equities. As we approach the election, investors would do well to consider both short-term market reactions and the broader economic implications. Billionaire investor Stanley Druckenmiller has expressed the view that the market is convinced former President Donald Trump will win the upcoming election.
During an interview with Bloomberg’s Sonali Basak, Druckenmiller said that if pressed to make a prediction, he would speculate that Trump is likely to emerge victorious. “It’s an evolving situation, and if you had asked me 12 days ago, I would have said, ‘I don’t have a clue, it’s still a total toss-up,'” Druckenmiller remarked.
Druckenmiller’s election impact analysis
“Now, however, the market appears that Trump is going to win.”
The founder and hedge fund manager noted that deregulated industries are expected to benefit and outperform other companies if Trump secures a second term. Druckenmiller’s investment career spans three decades, during which he has achieved average annual returns of around 30%, highlighted by his adept analysis of economic trends and monetary policy. Druckenmiller speculated that a Trump victory might result in a “red sweep” – Republican dominance in both houses of Congress.
“Personally, I think anybody that votes for Trump is probably not going to change their ballot for a Democrat in Congress,” he added. He believes that this scenario might strengthen the economy for a short period, estimated at three to six months, and he is planning his investment strategy accordingly. He also predicts the Federal Reserve will adopt a more hawkish stance under Trump than it would under a Harris administration.
However, Druckenmiller himself is not supporting either candidate, criticizing both their industrial policies as detrimental to free market capitalism, with Harris’s policies being “worse” for business regulation. Reflecting on his own political stance, he said, “I grew up in America with a certain model of a president—George Washington, Thomas Jefferson, Ronald Reagan was one in my lifetime—where there was a certain dignity and behavior in the office. I don’t judge anyone who wants to vote for Trump, but for me, it’s just a red line, so I’ll probably write in someone when I get to the polls.”
Third Point’s Daniel Loeb believes the odds are rising that former President Donald Trump will win the U.S. presidency this November over Vice President Kamala Harris.
The influential hedge fund manager is increasing positions that would benefit under a Republican administration and Congress. “We believe that the likelihood of a Republican victory in the White House has increased, which would have a positive impact on certain sectors and the market overall,” wrote Loeb in a letter to investors. “We believe the proposed ‘America First’ policy’s tariffs will increase domestic manufacturing, infrastructure spending, and prices of certain materials and commodities … a reduction in regulation generally and especially in the activist antitrust stance of the Biden-Harris administration will unleash productivity and a wave of corporate activity.”
Polls show that it is still going to be a tight race this November, with a recent NBC News poll showing that the Republican nominee and Vice President Kamala Harris are deadlocked.
But Loeb, in his quarterly missive, said he was increasing both “stock and option purchases” to bet on the Trump-win scenario. Loeb is not alone on Wall Street in making those bets, with JPMorgan most recently highlighting gains in bank stocks and the U.S. dollar as signs more investors see a Republican win. Some companies highlighted by Loeb as winners for the fund in the third quarter could benefit from deregulation and increased domestic manufacturing under Trump, notably utility PG & E, nuclear power play Vistra and conglomerate Danaher.
Alphabet — a company that has come under fire from the Biden administration for violating antitrust laws and which Loeb also owns — could also benefit. Additionally, Loeb believes Republicans will establish a majority in the Senate, no matter the outcome of the presidential race, and so that limits the downside for these stocks even if Harris wins. His note comes as Third Point Offshore has underperformed the S & P 500 this year, seeing year-to-date returns net of fees of 14% compared to the broad market’s nearly 23% gain.
The fund gained 4% last quarter, according to the letter, also trailing the market. Loeb implies his fund has been hurt in the short term because it holds extensive holdings away from large-cap technology stocks, which have been the stars of the narrow bull market. But he sees the improvement in market breadth that began in the third quarter continuing, especially under a Republican administration.
Overall, the U.S. economy is in good shape, according to Loeb, as he sees “no evidence” of a recession coming up the pike. The manager also revealed that he added a position in the Danish freight company DSV.
