How Another Trump Presidency Might Affect Your Tech Stock Investments

29/06/2024

Former President Donald Trump Arrives for Civil Fraud Trial in New York, United States – 17 Oct 2023

Presidents often tout the stock market’s performance when it does well on their watch — and remain quiet when it doesn’t. President Joe Biden did so when the S&P 500 hit a record high earlier this year, and ex-President Donald Trump regularly praised the stock market’s performance when he was in the White House.

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With Trump and Biden facing off again in the 2024 presidential election, investors are sizing up what a second Trump term might mean for the markets in general and tech stocks in particular.

Stock Market Performed Well the First Time

The stock markets did well when Trump was president. As Business Insider reported in 2021, the Dow Jones Industrial Average returned 56% during the Trump presidency for an annualized gain of 11.8% — the best performance for any Republican president since Calvin Coolidge. Even so, the performance under Trump still lagged behind the Dow’s performances under Presidents Bill Clinton (15.9% annualized return) and Barack Obama (12.1%).

As for the technology sector: Pure-play tech stocks did well when Trump was in the White House based on the performance of the Technology Select Sector SPDR Fund, an exchange-traded fund with the symbol XLK.

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XLK is a true tech index that only includes stocks in technology hardware, storage, and peripherals; software; communications equipment; semiconductors and semiconductor equipment; IT services; and electronic equipment, instruments and components.

The index gained 179% when Trump was in office, which is better than its performance under Biden (so far). The XLK closed at 128.26 on the day that Biden took office and closed at 226.82 on June 13, 2024, for a gain of 77%.

The five Big Tech stocks of Amazon, Apple, Microsoft, Facebook and Alphabet also had strong returns during Trump’s presidency. A week before the 2020 presidential election, CNBC analyzed how Big Tech fared under Trump. It found Big Tech was a “huge outperformer” during Trump’s first term.

For example, Microsoft’s stock surged 225% in the Trump era, continuing a strong turnaround that was already underway when Trump took office. The turnaround was driven by Microsoft’s growing cloud division as well as a couple of major acquisitions that included software development service GitHub in 2018 and video game publisher Bethesda in 2020.

Microsoft has continued to perform well under Biden, though not as well as under Trump. According to MarketWatch, Microsoft’s stock price traded at $237.48 on Feb. 1, 2021, early in Biden’s term. The stock currently trades around $445, which means it has returned more than 85% on his watch. It should be noted that Microsoft was coming off a much lower base when Trump took over as president.

What About AI and Nvidia?

It’s difficult to predict how tech stocks will be impacted by presidents because so much of their performance is based on innovation rather than policy. As Benzinga reported, Microsoft is making a big bet on AI by partnering with OpenAI, the creator of ChatGPT. It’s hard to see how someone sitting in the Oval Office will influence AI’s direction in the coming years.

Maybe the biggest tech stock story this decade is Nvidia, the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. Nvidia’s focus has shifted from PC graphics to the new frontiers of AI, virtual reality and high-performance computing — and its stock price has soared into the stratosphere.

Investors who bought Nvidia stock in March 2020 would have paid about $60 a share. By May 20, 2024, shares were trading at around $1,065 — a gain of nearly 1,700%. Nvidia has since undergone a 10-for-1 stock split. Again, Nvidia’s massive stock gain had much more to do with its business decisions and innovation than White House policies.

That doesn’t mean presidents can’t play a role, however. The main risk with Trump is if he makes good on his promise to impose harsher tariffs on imported goods — especially those from China. This negatively impacts U.S. tech firms that depend on China for business and supply chains.

Lee Munson, president of Portfolio Wealth Advisors, told Yahoo Finance Live earlier this year: “Biden has not been friendly to China, but Trump’s going to be even worse. … When you look at Trump, he’s mercurial and could just cut off the tap … and tell Nvidia they can’t sell anything.”

Stock Market Performed Well the First Time

What About AI and Nvidia?

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