U.S. Elections & the Markets
Review By: Stephen Maser, originally published November 1, 2012
With the U.S. presidential election coming up I thought it would be interesting to see what historical facts I could find relating to how the investment markets have behaved in the past.
Here is the raw data for time period and the average return for the DJIA:
Election Years Overall, +7.6%Incumbent Party Wins, +15.1%Incumbent Party Loses, -4.4%Democrat Wins, +3.9%Republican Wins, +10.3%
While this is interesting, what may be even more revealing is not who's in the Oval Office, but which party controls Congress. Here is the raw data for political control and the average return for the S&P:
Dem Pres/GOP Congress, +21.3%GOP Pres/Dem Congress, +4.5%Pres & Congress same party, +12.1%Pres (either party)/split congress, +7.1%
Since the 1928 election, the first after the creation of the DJIA the market has been up in all but three elections years. FDR, Truman and Eisenhower all started off with a down year in the stock market.
Since 1900, only five presidents have seen stocks rise more than 50% during their term; Coolidge, FDR, Eisenhower, Clinton and Obama.
The 3rd year of a president's term is usually the best for stocks on average but this did not work at all in 2008.
As always, past performance is never an indication of future results but the past always gives perspective.
Sources: MFS Investment Management, Business Insider, Investopedia