When compared against your overall investment horizon, a single presidential term is relatively brief. A single election cycle barely registers as a blip on the radar. The emotions that come with these events, however, can be expansive, consuming, visceral. Amid everything else that’s going on, we hope to put the campaign season between now and November into some financial perspective, because as the data shows, whoever is in the White House does not preordain doom or boom for stock returns. Stock market performance, when grouped by presidential party, historically has favored a Democrat in office, but it doesn’t tell the whole story (remember, correlation is not causation). In fact, stocks were up the majority of the time, regardless of who was in office. Even so, our political beliefs can color how we see the world around us – whichever party is in power – and so influence our investment decisions, often with less-than-ideal financial results.
The takeaway, of course, is that you are best served by looking past the upcoming election and focusing on the long term.
Data source: Dimensional Fund Advisors, our calculations. U.S. Stocks represented by CRSP 1-10 Index from 1945 to 2019. Calendar year returns used to calculate performance by presidential term. Past performance is not a guarantee of future results. All returns greater than 12 months have been annualized. Indexes are unmanaged and reflect reinvested dividends and/or distributions, but does not reflect sales charges, commissions, expenses or taxes. Stock investing involves risks, including increased volatility. All investing involves risk, principal loss is possible. Indices is not available for direct investment. the performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading.