Stock Market by President: Insights for Financial Planning

October 11, 2024

The stock market is highly susceptible to political developments. The outcome of an election – or even predictions about the outcome – can lead to significant fluctuations in stock prices. For you, as an investor, this means that you can expect your portfolio to be impacted by the upcoming presidential election – whatever the outcome might be. Investing is never an emotionally neutral activity. People buy and sell on the basis of what they feel, so the stock market is driven by fear and hope. There is a lot riding on the 2024 presidential elections. At the time of writing this article, the polls show that the country is roughly split down the middle and almost everybody has a very strong opinion about how the country will look if either candidate wins. As a result of all this strong sentiment, you can be sure that the markets will react somehow – but how, exactly? Let us see if we can decode the prospective state of the stock market by president, and see how you can plan accordingly.

How should you change your investment strategy in response to the upcoming election? The answer may surprise you: most often, the response is to change little or nothing. Your investment goals should be based on your portfolio’s key, long-term drivers, not who will be sitting in the Oval Office next year. Markets go through short-term fluctuations when elections occur, but they tend to stabilize as time passes, and the new president settles in. Too many investors have been driven to make investment errors as a result of election stress, so the important thing is to stay calm and not make any sudden moves.

Your Family CFO at LRVS Advisory Group will help you examine your portfolio and decide on the best moves to make in preparation for and after the election. There is far more to the stock market and your portfolio than who the president is, or which party holds a majority in the House and Senate.

Professional financial planning is always your best defense against impulsive investment decisions that could harm your portfolio.

Let’s take a look at what the historical evidence has to say about how recently elected and sitting presidents affect the stock market. It is interesting to keep these trends in mind, but remember that they are not written in stone. The patterns in the upcoming election may be exactly the same or they may be the opposite. However, these stats are good to know anyway.

On average, the S&P 500 has shown very similar annual growth rates since 1957, as these interactive charts demonstrate. The trends of growth or decline have largely been the same whether the country is under a Democratic president or a Republican one. As is shown by the bar graph in this article, the variance between the averages in the two cases is less than a single percentage point. The median annual growth rate for Democratic governments is 9.3%, while Republican administrations have led to slightly higher growth – 10.2%. Since 1929, only three presidents have experienced negative returns on the S&P 500: Hoover, Nixon, and George W. Bush. The fact that these were all Republicans is not, in itself, significant. With all of these presidents, there were other factors at play that would have led to these bad results. Hoover had the misfortune of presiding over the 1929 stock market crash and the start of the Great Depression. Nixon’s presidency was sullied by the Watergate scandal, and George W. Bush had to deal with the September 11th attacks and the ensuing military actions. All of these things could just as easily have happened to Democratic presidents.

In more recent history, the best-performing president in the post-World War 2 era has been Bill Clinton, who led a massive 210% growth in the S&P 500 during his 1993-2001 tenure. The article that cites this figure essentially argues that history seems to favor a Democrat in the White House. At a glance, this appears to be so, but there is probably more to it than that. Indeed, the best and second-best performers have been Democrats: the next best after Clinton’s tenure is Barack Obama’s presidency, which saw the S&P 500 grow by 189%. However, two Republicans, Trump and Reagan, are in third and fourth place respectively. Once again, it should be noted that the party each of these presidents came from is not necessarily the most important factor. Their specific policies and the political and economic conditions they happened to face during their presidencies are more important than their political affiliation.

What this brief overview tells us is that the outcome of an election does have an effect on the economy, but in the long run, that effect is not always significant. There are far too many variables at play, so don’t let yourself get carried away by the election hype.

Contact us if you would like to find out more about the benefits of having one of our dedicated family CFOs help you plan your investments in the stock market by president, together with all the investment advice you need to grow and protect your wealth.

*Disclaimer:

This article is provided by McAdam LLC (“McAdam” or the “Firm”), is for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. Past Performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. No portion of this article is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax, or legal advice. Certain information contained in this report is derived from sources that is believed to be reliable; however, the Firm cannot guarantee the accuracy or timeliness of such information and assumes zero liability for any resulting damages.

McAdam is an SEC registered investment adviser that maintains a principal place of business in the Commonwealth of Pennsylvania. The Firm may only transact business in those states in which it is notice filed or qualifies for a corresponding exemption from such requirements. For information about McAdam’s registration status and business operations, please consult the Firm’s Form ADV disclosure documents, the most recent versions of which are available on the SEC’s Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov.

This article is the sole opinion of this individual and is not indicative of the firm’s beliefs.