Unless you’ve been fortunate enough to avoid all political mailings, internet pop-ups, and television commercials, you are aware of the upcoming presidential election taking place in the United States. This one is as emotionally charged as they come. Everyone has their opinions about which candidate, party, and policies will be best for them. But what does it all mean for our portfolios?
History shows that over time, the markets have been favorable regardless of the party occupying the White House. As you can see in the chart below, through many decades and many presidents of both major parties, the markets have generally trended upward. This is through war, recession, technological advances, globalization, a changing geopolitical landscape, the growth of our country, and vast innovation from around the world.
If there is one thing that has remained constant, the party in power has not mattered much in the overall stock market returns. Checks and balances ensure that one person’s ideas are not the only thing that get enacted as law. Policymakers are voted on separately than the presidency and make up the legislative branch of our government. Regardless, many people vote for the presidency with the economy as their most important factor.
Our partners at Dimensional Funds have summed it up well with the following quote from their article, “Presidential Elections: What Do They Mean for Markets?”
“It’s natural for investors to find a connection between who wins the White House and which way stocks will go. However, shareholders are investing in companies, not a political party. And companies focus on serving their customers and helping their businesses grow, regardless of who is in the White House.” https://my.dimensional.com/presidential-elections-what-do-they-mean-for-markets
The chart below from Dimensional Funds illustrates the growth of $1 invested in the S&P 500 from 1926-2023.
Chart Source:
Bulls, Bears, and Ballots: When Looking at Politics and Markets, Think Long Term
Nobody can look into the future and tell you where the markets are going. We can only look at what they have done historically and draw our hypothesis on what will happen in the next 5-, 10-, and 20+ years. The important thing today is to make sure you cast your vote for whichever candidate you think will do a better job as our country’s commander-in-chief and remember to stick to your long-term investment plan no matter the outcome.