Presidential Elections Impact on Stock Market

This is Brad Barrie, Chief Financial Officer and Portfolio Manager with Dynamic Wealth Group.  Welcome to this market and economic update. In this video, we’ll discuss how presidential elections tend to impact the stock market.

The presidential election cycle is heating up and there will no doubt be a flurry of daily headlines between now and election day on November 5.

At the moment, it looks like there will be a rematch between Joe Biden and Donald Trump. Understandably, many investors have strong feelings when it comes to these candidates and their policies and may have many concerns about how this might impact the stock market.

It goes without saying that elections are very important as voters, taxpayers, and citizens. However, history shows that it’s important to separate our personal feelings from our financial decisions. Over the next few minutes, I’ll show why we should try to vote at the ballot box and not with our hard-earned savings.

First, the stock market has performed well across both political parties. This chart shows that the long upward march of the S&P 500 has occurred across many different presidents.

In fact, the worry that a particular candidate will “ruin the economy” or “kill the market” has been said about every president in modern times. This was certainly said about President Obama, President Trump, and more recently President Biden.

And yet, the S&P 500 rose 236% during the Obama and Trump years, despite how vast the perceived differences were between those presidents. This has continued over the past three years with the market reaching new all-time highs. In hindsight, it would have been a mistake to make investment decisions based solely on who was in the Oval Office.

So, what really matters is the underlying business cycle. This chart shows the annual returns of the S&P 500 along with the average annual returns for each president since FDR.

While the president certainly influences policies which can affect taxes, industries and the economy, there are many other important factors that drive these cycles.

Perhaps the best examples are the Clinton and George W. Bush years. Clinton benefited greatly from the dot-com boom throughout the 1990s, resulting in budget surpluses and a historic bull market.

George W. Bush, on the other hand, came in during the dot-com crash and the tail end of his presidency coincided with the 2008 financial crisis. Bad timing aside, it would be hard to argue that these presidents alone were responsible for these booms and busts. Many other factors such as technological and financial innovation played a much larger role.

Finally, this chart summarizes this discussion well. It shows that on average, S&P 500 returns have been positive across both parties. To put this another way: it is NOT the case that the stock market is negative or has always crashed under one party or another.

This further underscores the importance of staying balanced and separating our political views from our financial decisions.

At Dynamic Wealth Group we believe and understand that the markets can be impacted by literally endless numbers of variables.  This is despite what the financial media would lead you to believe that stocks go up or down based on signal variables (like who’s in the white house, or even what one economic item such as what inflation might be saying.)  That is why it is vitally important to not attempt to predict the future, but instead invest in a truly diversified portfolio implementing different asset classes, approaches, and methodologies.

Now, we’ve only scratched the surface on this topic, but we hope you found these insights helpful. Please don’t hesitate to reach out if you would like to discuss this, or any other financial topic.  We’d look forward to speaking with you.


Clearnomics and Dynamic Wealth Group, LLC are not affiliated entities.  No part of this should be taken as investment advice.  Consult your financial advisor for specific investment recommendations tailored to your specific situation. 

Dynamic Wealth Group (“Dynamic”) is an SEC-registered investment adviser. SEC registration does not constitute an endorsement of Dynamic by the SEC, nor does it indicate that Dynamic has attained a particular level of skill or ability. This material prepared by Dynamic is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Opinions expressed by Dynamic are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Dynamic, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.

Dynamic does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice.

Any reference to an index is included for illustrative purposes only, as an index is not a security in which an investment can be made. Indices

are unmanaged vehicles that serve as market indicators and do not account for the deduction of management fees and/or transaction costs generally associated with investable products. Past performance is no guarantee of future results. Actual returns may be lower.

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