Presidents often tout the stock market's performance when it does well during their terms and stay quiet when it doesn't. President Joe Biden did so when the S&P 500 hit an all-time high earlier this year, and former President Donald Trump frequently praised the stock market's performance during his time in the White House.
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As Trump and Biden face off again in the 2024 presidential election, investors are trying to gauge how a second Trump term would affect the market as a whole, and tech stocks in particular.
Stock market performs well for the first time
The stock market has performed well under President Trump. As Business Insider reported in 2021, the Dow Jones Industrial Average rose 56% during Trump's term, for an annualized gain of 11.8%, the best performance of any Republican president since Calvin Coolidge. Still, Trump's performance didn't match the Dow's performance under Presidents Bill Clinton (15.9% annualized gain) and Barack Obama (12.1%).
Speaking of the technology sector, pure tech stocks have performed well during Trump's presidency, based on the performance of the Technology Select Sector SPDR Fund, an exchange-traded fund with the symbol XLK.
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The XLK is a true technology index that includes only stocks in technology hardware, storage, peripherals, software, communications equipment, semiconductors and semiconductor equipment, IT services, electronics, equipment and components.
The index rose 179% during President Trump's presidency and has outperformed the Biden administration (so far): XLK closed at 128.26 on the day President Biden took office and closed at 226.82 on June 13, 2024, a 77% increase.
The big five tech stocks — Amazon, Apple, Microsoft, Facebook, and Alphabet — also saw strong returns during President Trump's term. A week before the 2020 presidential election, CNBC analyzed the performance of tech stocks under the Trump administration. The results showed that tech stocks “did a lot better” during Trump's first term.
For example, Microsoft's stock price rose 225% during the Trump administration, continuing a strong recovery that was already underway when Trump took office. This recovery was driven by the growth of Microsoft's cloud division and several large acquisitions, including software development service GitHub in 2018 and video game publisher Bethesda in 2020.
Microsoft has performed well under the Biden administration, but not as well as it did under Trump. According to MarketWatch, on February 1, 2021, early in the Biden administration, Microsoft shares were trading at $237.48. Today, the stock is trading around $445, representing a return of over 85% under Biden. It should be noted that Microsoft shares were much lower when Trump took office.
What about AI and Nvidia?
It's hard to predict how tech stocks will be affected by the president, because much of their performance is based on innovation, not policy. As Benzinga reported, Microsoft is making a big bet on AI by partnering with ChatGPT developer OpenAI. It's hard to predict how the person sitting in the Oval Office will affect the direction of AI in the coming years.
Perhaps the biggest tech stock story of the last decade has been Nvidia, the world leader in visual computing technology and inventor of the graphics processing unit. As Nvidia's focus shifted from PC graphics to the new frontiers of AI, virtual reality, and high-performance computing, its stock price soared into the stratosphere.
Investors who bought Nvidia stock in March 2020 paid about $60 per share. On May 20, 2024, the stock was trading around $1,065, a nearly 1,700% increase. Nvidia subsequently did a 1-for-10 stock split. Again, the massive increase in Nvidia's stock price is due more to the company's business decisions and innovation than to White House policy.
But that doesn't mean the president can't play a role. The main risk for Trump is if he follows through on his promise to impose tougher tariffs on imports, especially those from China, which would have a negative impact on US technology companies that rely on China for their business and supply chains.
“Biden is not friendly to China, but Trump is going to be even worse. … You look at Trump, he's on a whim and could easily cut off supplies and tell Nvidia not to sell anything,” Lee Munson, president of Portfolio Wealth Advisors, told Yahoo Finance Live earlier this year.
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This article originally appeared on GOBankingRates.com: How President Trump's Reelection Will Affect Tech Stock Investing
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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