Stock Market Performance and Presidential Elections

Stock Market Performance and Presidential Elections

Many investors are concerned with how the stock market will be impacted by a change in America’s president, but do presidential elections really influence the stock market?

There have been 23 elections since the S&P 500 Index began, and 19 of those have seen positive performance.1 There seems to have been a trend where year 3 of a president’s term is usually the strongest year for the market, followed by year 4, then year 2 and finally year 1.

This trend was challenged by recent history. In each of Obama’s terms, the first 2 years were more profitable than the third, and for Trump, the first year was more profitable than the second, before a major surge in year 3, followed by volatile markets due to the coronavirus in 2020.2

The table below provides the total economic data under each president since 1945.3


 Regardless of which candidate is elected and whether one political party assumes the trifecta of power in Washington, the biggest challenge to America’s economic future may well be the coronavirus. Up until the 2020 outbreak, the stock market had proved remarkably strong throughout the Trump administration, despite some short-term volatility. Even with the plunge after the early spring lockdown in many areas of the country, the stock market still managed to rebound in late March. However, many analysts believe the market’s present sustainability is largely propped up by heavy stimulus from the government, via Congress and the Federal Reserve.

While economic concerns were generally the top driver in past elections, a recent Fortune-SurveyMonkey poll revealed that the current primary political fear is the ongoing COVID-19 pandemic and public health. The data found that 37% of voters say that the pandemic is the number one issue that will drive their vote.4

The advice for portfolio management in the wake of an election year remains the same, now more than ever: don’t base your investment decisions on who the president is or which party controls Congress. Focus on yourself: your goals, your investment time horizon, your tolerance for day-to-day market volatility.

We will work with you to develop a diverse asset allocation strategy designed to allow for flexibility and the resilience to weather political events, economic declines, and pandemics. Keep your eye on the long term and contact us any time you could use some reassurance. In short, keep your eye on your own future, and ignore the noise that accompanies this election season.

If you have any questions or concerns about your retirement plan, give us a call at 801-465-6990, we’re happy to help!

  1. Dimensional. “Matrix Book 2019.” Accessed Sept. 29, 2020.
  2. ibid
  3. Sergei Klebnikov and Halah Touryalai. Forbes. July 23, 2020. “We Looked At How The Stock Market Performed Under Every U.S. President Since Truman — And The Results Will Surprise You.” Accessed Aug. 29, 2020.
  4. Nicole Goodkind. Fortune. July 30, 2020. “The economy is no longer Americans top concern heading into the 2020 election.” Accessed Aug. 29, 2020.

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