Do Presidential Elections Affect The Markets Over The Long Term?
In a U.S. presidential election year like 2024, headlines regarding who is leading in the polls or how a candidate fared in the latest debate tend to dominate the news cycle. Investors often equate controversy with swings in the investment markets, particularly during the primaries. Still, history indicates markets continue to grow over the long term regardless of who sits in the Oval Office. Figures 1 and 2 are courtesy of Capital Group. Figure 1 shows the 10-year growth of a hypothetical $10,000 invested in the S&P 500 at the start of each election year since 1936, with blue bars representing a Democrat winning the presidency and red bars showing a Republican as the victor at the beginning of the 10 years. Except for the 2000s, which saw the dot-com bust and global financial crisis, every 10-year period has seen growth in the S&P 500. And while growth has been somewhat higher under a Democratic president, it has averaged over 10% regardless of the president’s political affiliation.
Finally, while we use broader-market proxies for our U.S. investing and do not focus on sectors of the U.S. economy, it is interesting to see what industries would benefit if there were a blue or red wave (i.e., one party taking over the presidency as well as both houses of Congress). A Republican sweep, or red wave, could benefit banks, healthcare providers, and oil and gas companies, primarily through deregulation. A Democratic sweep, or blue wave, could boost renewable energy initiatives, industrial stimulus spending, and telecommunications projects through additional funding for nationwide broadband access.
At Brown Financial, our investment philosophy centers on time-tested strategies that prioritize consistency rather than reacting to external influences or shifts. By continuously monitoring the markets and your portfolio, we can identify opportunities when they arise and make thoughtful adjustments to enhance returns, even during periods of uncertainty. Learn more about how our common-sense approach to investing may be able to help you achieve long-term financial outcomes.
Figure 1
Figure 2
