Election Year

Election Year

Published On: June 6, 2024

Written by: Ben Atwater and Matt Malick

In case you missed it, this is a presidential election year. We must endure the constant TV commercials, fundraising text messages, tedious debates and 24/7 news cycle as we approach November 5th.

But should we worry about the impact on our investment portfolios?

In financial markets, the past is not always prologue. But it provides some insight into how politics typically impacts markets.

We start with presidential elections. The chart above shows the average historical short-term market reaction (from the day after election day through inauguration day) since 1952 when Democrats or Republicans win the presidency. YCharts breaks down the results by incumbents, challengers and neither (the incumbent has served the maximum two terms). The good news is that both potential 2024 scenarios have historically led to short-term gains: incumbent Democrats (+4.82%) and Republican challengers (+2.02%), albeit based on a small sample size.

Next, we include the impact of congressional elections on stock market returns. The chart above shows the average historical annual performance of the S&P 500 under Democratic and Republican presidents, broken down by control of Congress (the Senate and House of Representatives). All scenarios resulted in positive average annual returns but some much better than others. And the historical worst-case scenario – Republican president and Democratic Congress – polls indicate is the least likely outcome in November.

Interestingly, some of the best results came during periods of divided government. The less lawmakers can meddle, the better markets perform.

Regardless of one’s political affiliation, it is best to ignore politics when investing. The chart above illustrates the historical cost of investing only when one party is in power. Beginning in 1950, $10,000 invested in the Standard & Poor’s 500 would have grown to a whopping $3.154 million today. But investing only during Democratic presidencies would have grown to just $405,540 and Republican presidencies a mere $77,770. The opportunity cost of pulling out of the market based on politics was hefty. The power of compounding requires all political seasons.

2024 is an especially charged election year. While historical data supports staying invested, we understand that investors are nevertheless wary. Please do not hesitate to contact us to discuss your specific portfolio and approach moving forward.


© 2024 Atwater Malick, LLC All Rights Reserved. Website Design & Development by WebTek