Post-Election Panic? Why Smart Investors Look Beyond Candidates and Focus on Long-Term Growth

TL;DR:

U.S. Presidents has minimal long term impact on the S&P 500; focus on economic fundamentals that affect long-term growth.

Investors have long debated over whether Democratic or Republican Presidents are better for the markets but political leadership seems to have little effect on the S&P 500's long term path.

Since the index was created in 1957, it has returned an average return of around 10% per year. This figure that has stayed more or less consistent regardless of whether the Democrats or Republicans controlled the White House. During Democratic administrations, the average annual return was roughly 10.6%, while Republican administrations averaged a return of 10%. These figures highlight that markets adapt and grow due to broader economic forces rather than specific political ideologies.

Growth of $1 Invested in the S&P 500, 1926–2023

Short term volatility around voting times can be expected. However, in the 12 months following an election, the S&P 500 has usually rebounded. Between January 1969 to March 2024, the S&P 500 has seen a positive annualised return under eight of the last ten Presidents. Richard Nixon averaged -1.5% per annum & George W. Bush averaged -2.9% per annum losses. The other eight Presidents saw double digit annualised returns. Historical data suggests that the S&P 500's performance seems to be more about things like people’s purchasing power, interest rates being high or low and how well companies are doing rather than who's running things politically.

We encourage investors to focus on long term portfolio growth rather than trying to time or second guess the market around a US Presidential Election. A diversified portfolio and staying focused on individual financial goals help to avoid the temptation to react to political events. Election related volatility may be uncomfortable in the short term but data shows that the S&P 500's long-term growth trend remains strong.

To sum up, past numbers clearly show that the result of U.S. presidential elections does not disrupt how the S&P 500 does in the long-term. Investors should ignore the political circus and all the accompanying noise that it brings. Instead, stay focused on the long term and their own financial goals.

Sources

1. S&P data © 2024 S&P Dow Jones Indices LLC, a division of S&P Global.

2. https://www.dimensional.com/sg-en/insights/bulls-bears-and-ballots-when-looking-at-politics-and-markets-think-long-term

Disclosure

Past performance is not a guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Each president’s annualized return starts with the first month of presidency and ends with the last full month of returns of presidency. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower

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