American Presidential Elections and U.S. Stock Returns

May, 2024

On November 5, American voters will cast their ballots for the next president of the United States. With six months of vigorous campaigning yet ahead, with likely candidates in place, investors and commentators will have plenty of opportunities to speculate how the forthcoming elections will affect not only their lives but how the stock market may perform as American and businesses worldwide are impacted by a future president.

It’s natural for investors to seek a connection between the winner of four years of free White House rent and how their portfolios may perform during those years. But regardless of who wins, nearly a century of return history shows that American stock markets have largely trended upward.

We have data on 24 elections to search for a connection between a Presidential winner and stock performance. We see many more positive Presidential terms (20) than negative (4). Stocks have rewarded diversified investors who endured market ups and downs regardless who was president. They would have thrived through both Democratic and Republican presidencies for the most part despite highly unsettling events and calamities occurring over each of ten decades (Exhibit 1).

Exhibit 1: Market Growth and American Presidential Elections

Hypothetical growth of $1 invested in the S&P 500 index, 1926–2023

Graph: Exhibit 1: Market Growth and American Presidential Elections Hypothetical growth of $1 invested in the S&P 500 index, 1926–2023

Source: Dimensional Fund Advisors and S&P Dow Jones Indices LLC. Past performance is not a guarantee of future results. Indices are not available for direct investment. Growth of wealth shows the growth of a hypothetical investment of $1 in the securities in the S&P 500 index. Data presented in the growth of wealth chart is hypothetical and assumes reinvestment of income and no transaction costs or taxes. The chart is for illustrative purposes only and is not indicative of any actual investment.

Stock and fund owners are investing in companies which focus their best efforts on serving their customers and profitably growing their businesses, regardless of who temporarily occupies the White House.

U.S. presidents have impact on market returns through their exercise of executive discretion, but other factors may nullify that power — such as the actions of foreign leaders, interest rate changes, regulatory changes, changing oil prices, and innovative technological advances.

People often have firm convictions regarding politics and policy, but market impact due to an election win is mostly a coin flip. Predicting how securities markets will react to the post-election events are mixed up with unpredictable Congressional and state elections, and unpredictable elections in many other countries.

Your financial planning should be based on goals personally important to you and your family, where your investments and insurance work in harmony to best achieve those goals. Media noise about elections doesn’t really matter for planning.

Choose to vote with your ballot, and not with your money. Making smart money choices through a goal-focused systematic planning process that you control is what CFP® professionals like us can help you do.