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How another Trump presidency could affect your investments in technology stocks

Curtis Means/UPI/Shutterstock / Curtis Means/UPI/Shutterstock

Curtis Means/UPI/Shutterstock / Curtis Means/UPI/Shutterstock

Presidents often praise the stock market when it performs well under their leadership – and remain silent when it does not. President Joe Biden did so when the S&P 500 hit a record high earlier this year, and former President Donald Trump regularly praised the stock market’s performance during his tenure in the White House.

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As Trump and Biden face off again in the 2024 presidential election, investors are assessing what a second Trump term could mean for markets in general and technology stocks in particular.

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The stock market performed well for the first time

Stock markets performed well during Trump’s presidency. As Business Insider reported in 2021, the Dow Jones Industrial Average returned 56% during the Trump presidency, representing an annualized gain of 11.8% – the best performance by a Republican president since Calvin Coolidge. Still, performance under Trump lagged the Dow’s performance under Presidents Bill Clinton (15.9% annualized return) and Barack Obama (12.1%).

As for the technology sector, pure-play technology stocks performed well during Trump’s tenure in the White House, as evidenced by 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 technology index that includes only stocks from the technology hardware, memory and peripherals, software, communications equipment, semiconductors and semiconductor equipment, IT services, and electronic devices, instruments and components sectors.

The index gained 179% during Trump’s term, which is better than its performance under Biden (so far). XLK closed at 128.26 on Biden’s inauguration day and closed at 226.82 on June 13, 2024, a gain of 77%.

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

For example, Microsoft shares rose 225% in the Trump era, continuing a strong turnaround that was already underway when Trump took office. The turnaround was fueled by Microsoft’s growing cloud division as well as a few big acquisitions, including software development service GitHub in 2018 and video game publisher Bethesda in 2020.

Microsoft has continued to perform well under Biden, although not as well as it did under Trump. According to MarketWatch, Microsoft’s stock price was $237.48 on February 1, 2021, at the beginning of Biden’s term. The stock is currently trading at around $445, meaning it has returned more than 85% under his leadership. It’s worth noting that Microsoft started from a much lower base when Trump took over as president.

What about AI and Nvidia?

It’s difficult to predict how presidents will impact tech stocks because their performance is based in large part on innovation, not policy. As Benzinga reported, Microsoft is betting big on AI, partnering with OpenAI, the developer of ChatGPT. It’s hard to imagine how someone sitting in the Oval Office will influence the direction of AI in the coming years.

Perhaps the biggest tech stock of this decade is Nvidia, the world leader in visual computing technologies and inventor of the graphics processor. Nvidia’s focus has shifted from PC graphics to the new frontiers of artificial intelligence, virtual reality and high-performance computing – and the company’s stock price has shot into the stratosphere.

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

That’s not to say presidents can’t play a role, though. The biggest risk with Trump is that he follows through on his promise to impose higher tariffs on imported goods – especially those from China. This would have a negative impact on U.S. technology companies that rely on China for their 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 will be even worse. … If you look at Trump, he is fickle and could just turn off the money tap … and tell Nvidia they can’t sell anything.”

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This article originally appeared on GOBankingRates.com: How another Trump presidency could affect your investments in technology stocks

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