Presidential Elections and the U.S. Stock Markets
Politics, economics, and financial markets are often intertwined in investors’ minds, with the notion that the political landscape highly correlates to the future of financial markets. The U.S. stock market has been analyzed, researched, and studied for over one hundred years by many top minds of their time. While this article is not intended to change or influence your political beliefs, it is meant to reflect that politics and portfolios should be considered independently and investment plans should be focused on personal objectives rather than political influence.
The stock market has a long history of generating positive annual returns over many different administrations, both Democratic and Republican.
If you study the chart, “The Odds of Being Positive” you can fully appreciate the power of stock market returns over time. Illustrated are the annual returns of the S&P 500 from 1926 – 2019.
The green boxes represent years when the S&P 500 produced positive returns and the red boxes show the individual years generating negative returns. The stock market had positive annual returns 73.4% of the time over the past 94 years. If you focus on sizable market returns of plus or minus 30%, gains over 30% occurred 20 times and losses greater than 30% happened only three times. Those are powerful odds in the investor’s favor.
This data stretches over 19 different presidents from Taft to Trump. It also covers major events from the Great Depression, World War II, stagflation, the technology boom, to the financial crisis of 2008. The collection of companies that comprise the market may change over time, but the market in general has proven resilient and has performed quite well under both Democratic and Republican administrations.
Despite any political leanings for investors, when it comes to portfolio returns, the numbers support the notion that it does not matter much who is living at the White House. An easy conclusion is that Republican policies tend to be more business friendly so one would expect higher stock returns coming from Republican administrations. The data since 1900 tells a different story. The S&P 500 averages about a 9% annual return when the president is Democrat and a 6% annual return when a Republican is in the White House.
Personally, it can be more comforting when you agree with Washington’s policies morally, but your portfolio is not invested in the president or congress. Your portfolio is invested in the economy and the corporations operating in it. You can be a loyal Republican, Democrat or Independent, but don’t let your political views derail your investment plan. Keep your investment program focused on your goals, risk tolerance, and time horizon and avoid unnecessary complications of mixing political views with the long-term objectives for your money.
Start with a complimentary portfolio review with our team and let us put a plan together to keep you on track. You can also schedule at time with us by calling 614-760-0670.
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Thanks to our partner, Gradient Investments, LLC. for providing the information for this article. You can review the entire Gradient Investments, LLC article titled, “Presidential Election Cycles and the U.S. Stock Market.”