Stock Returns and Politics: Does it really matter who wins the election?
Does who wins the election, Republican or Democrat, really have a bearing on stock market returns? Let's take a look at the data and find out.
Transcript
Chip Hymiller (00:02): One of the questions we've been getting quite a bit recently is how is this election cycle going to impact the future performance of stocks? it's a fascinating question when you think about it, but I'd like to talk about that by looking at some of the data in this slide, you can kind of see, the various presidential elections. So you can kind of see, okay, over the course of time, since 1928, if we look at what has happened the year of the election, and also the subsequent year after the election, you can kind of see that, by and large returns have been positive each of those two years, in fact, the year of an election has generally, if we look at the S&P 500 data now has generated a positive annual return of about 11.3%, 11.5% Or so.
Chip Hymiller (00:57): In the years after the election, returns on average have been about 9.9%. So phenomenal returns. If you think about it, both the year of the election, as well as the subsequent year after the election. What about presidential administrations? This chart and this slide really shows how returns have been during, certain, presidential administrations. So the red graph indicates a Republican administrations and the blue bars kind of indicate the democratic presidential candidate. And so you can kind of see that own average. Again, it's mostly positive. In fact, the average return for a presidential term is about 10.3%, which ironically enough is about the same as the longterm return of the S&P 500. What about investing money over the course of these? And this is a great graph that really shows okay. By and large regardless of the political affiliation of the president, the stock market has generally been on upward trend.
Chip Hymiller (02:17): So there are bumps along the way, you know, you can see there's tons of declines and that's something that we expect regardless of who's in the white house, you know, but by and large, the market assimilates an upward trend. And so we kind of expect that to continue. What about who's in control of Congress? Does that have an impact? You can kind of look at this slide here and again, it doesn't really matter. The blue is the democratic controlled comp Congress. The red is the Republican controlled Congress and the lighter colored red or the mixed bars kind of show a you know, neither party controls Congress. So you can kind of say, look at this and, and, and ascertain that, you know, by and large, it doesn't really matter. Who's in control of Congress. The stock market, continues on an upward path.
Chip Hymiller (03:15): Of course, there's always going to be bumps along the way things happen. We know that especially this year, things out of our control is kind of impacting returns in the market, but by and large, it's not influenced by the control of a political party. So what are some things to summarize, how we kind of think about things it's very difficult to identify any systematic return patterns in election years. We just don't count on that. Stock returns tend to be positive regardless of the political party that is in control of the white house or Congress. And also on average market returns have been positive both in election years and subsequent years. So by and large, it doesn't matter. Who's in control of Congress or who wins the presidential race. The market tends to follow an upward tracking pattern. Hopefully this has been a helpful presentation. Please let me know if you have any question.