The recent announcement of President Biden withdrawing from the US Presidential race and Kamala Harris securing the Democratic nominee has dominated headlines recently. This has left many wondering about its implications for the markets, as investors weigh the potential economic policies of newly elected officials.
Below, I’ve included some interesting charts that illustrate the historical relationship between the stock market and US elections.
How The Stock Market Performed Under Different Presidents:
Since John F. Kennedy’s inauguration in 1961, the S&P 500 has posted negative returns during only two presidencies: Richard Nixon and George W. Bush. Despite the political landscape, the S&P 500 has consistently grown in value over the long term, regardless of who is in office.
How The Market Reacted To The Previous Two Elections:
The post-election period for both recent elections was generally positive for equities. The S&P 500 showed positive performance throughout the entire period from Election Day to Inauguration Day.
How The Market Performed During Election Years:
Historically, US markets have generally risen during election years and throughout each year of a presidency. Notably, the first year of a presidency has been favorable for markets, with an average rise of 8.3%.
How You Would Have Done If You Invested Only During The Presidencies Of One Political Party:
Since 1950, if you had invested only during Republican presidencies, your annualized return would have been 2.8%. Conversely, investing solely during Democratic presidencies would have yielded a 5.11% annualized return. However, staying fully invested throughout this period would have resulted in an 8.05% annualized return.
While Presidential elections often capture significant attention and generate a lot of market noise, who occupies the Oval Office has had minimal impact on the markets. Historically, the stock market has generally risen during election years and throughout different presidencies, regardless of the political party in power.
Market performance instead, is more closely tied to fundamental factors such as corporate earnings, interest rates and other economic factors. That’s why it’s important to create a portfolio that carefully considers these and other essential elements. Ignoring market noise and staying fully invested in the optimal portfolio we create for you, which aligns with your unique investment strategy and financial goals, remains the best approach for achieving financial success.