Money Matters
Will the November Elections Affect the Markets?
Will the November Elections Affect the Markets?
Have you thought about how the outcome of the elections might impact your investments?
None of us can escape the fact that we are deep into the political season. Elections can leave many people with uncertainty and wondering how a political shift could affect the economy and, in turn, their portfolio. The future state of the market is unpredictable; however, understanding historical trends can help you navigate through ambiguous times with greater confidence.
What The Data Reveals
It turns out that based on history, you may wish to vote for the candidates that match your views on all of the other important issues, not the stock market. By the same token, it is generally unadvisable to make adjustments to your investments based on what you think the outcome might be. That’s according to historical trends dating back nearly 100 years.
There have only been 24 elections since 1928 so that is not enough data to use for any definitive predictions. Just like all statistics, the data can be misleading. During an election year, the incumbent President may have as much to do with the outcome of the markets as the newly elected President.
In summary, looking at the data shows that there doesn’t seem to be a dramatic difference based on the outcome of the Presidential elections. Returns seem to be similar regardless of the winning party.
Average S&P 500 total returns for election years (excluding 2008)
Presidential Election Years | Returns with Republican Elected | Returns with Democrat Elected |
---|---|---|
1928–2020 | 15.3% | 12.3% |
1948–2020 | 12.4% | 13.9% |
1960–2020 | 12.4% | 15.1% |
Source: Bloomberg, UBS
Indices are unmanaged. It is not possible to invest directly in an index.
As the data above shows, from a short-term investment standpoint there is no historical reason to make changes to your investment portfolio based on your expected election outlook.
Long-Term Investments
We would argue the same for longer-term performance, as illustrated next.
The data below is from 1926 through 2023. It shows the past returns of the S&P 500 Index during four potential outcomes: Republicans controlling both sides of Congress as well as the White House, Democrats controlling everything, and then each party controlling the White House with a split Congress. Although you may spot some differences, if history can be a guide, staying invested will be your best course of action!
Situation | Number of Years | S&P 500 Index Annual Average Return |
---|---|---|
Unified Republican | 13 years | 14.52% |
Unified Democrat | 36 years | 14.01% |
Divided with Republican President | 34 years | 7.33% |
Divided with Democratic President | 15 years | 16.63% |
Source: Retirement Researcher
Indices are unmanaged. It is not possible to invest directly in an index.
Key Takeaways
There is always a danger in trying to draw any conclusion from historical data. Were the occurrences from the past merely random, or is there an actual pattern? Unfortunately, we have no way of predicting if the data from the past will be meaningful in the future environment. The conclusion that seems most obvious is that the stock market will march to its own beat based on many other factors, no matter what political party controls each branch of government.
The materials and the information provided are not designed or intended to be applicable to any person’s individual circumstances. These statements do not constitute an offer or solicitation in any jurisdiction. All included information and data are limited only to the inputs and other financial assumptions indicated. These materials are provided for informational and educational purposes only and do not constitute a recommendation to buy, sell, or hold any security, nor do they constitute legal, accounting, or tax advice.
Past performance is no guarantee of future results. All investments are subject to risk of loss, and any investment strategy may lose value.
Every election is important, but it’s clear that the 2024 content will impact employers in a big way. Learn more by accessing the 2024 Election Hub and viewing the on-demand webinar “2024 Pre-Election Q&A: What’s at Stake for American Employers?”
Investment advice offered through OneDigital Investment Advisors LLC. OneDigital Investment Advisors LLC is an SEC-registered investment adviser. Please note the other companies referenced on this website are separate entities from OneDigital Investment Advisors LLC and are not authorized to provide, and do not provide, investment advisory services.