A client asks me almost every week how I select blog topics to write about. I wish I had some great strategy, but the answer to the question is rather simple… I most often write about what clients are asking us. We are of the opinion that if multiple clients ask us the same question, there are dozens of other clients who are thinking about that same question.
As you may imagine, the #1 question we have received over the past few weeks has to do with how the upcoming presidential election will affect investment portfolios. Because of this, we are writing a 3-part blog series to look at how elections have affected investment portfolios in the past and what might be in store for this upcoming election season.
During the first of this three-part series, we will study historic investment returns based on who had control in Washington, D.C.
Investment Returns By Sitting Presidents
Is there one political party that has created consistently superior investment returns solely based on who was elected president? Dating back to 1900 and using the Dow Jones stock market index, you can see that Republican presidents have produced slightly better gains over the past 123 years. All in all, the race is pretty tight (pun intended)… neither party has produced consistently superior investment returns.
Source: Bespoke Investment Group 2024
Investment Returns By Party Control
We also looked at the market performance based on party control for the year FOLLOWING an election. As you can see, a unified Republican government has produced the highest returns dating back to 1937, but a divided government with a Democrat president is not too far off. Bottom line… a divided government has also produced positive returns.
Source: Janus Henderson Investors
“Divide and rise” is a term that you may have heard of over the years. It is referring to the markets liking a divided government which historically provides a higher degree of certainty that policy changes will be less material than the potential changes made by a unified government of Republicans or Democrats.
Should I Sit Out until My Party Has Control?
This is a question we hear a lot. And we understand why… politics affect our daily lives. Politics can affect the price of food, the price of gas, our perceived feeling of safety, the schools that our kids or grandkids attend, the roads we drive on and so much more.
With that being said, it has been a very poor investment strategy to “sit out” of the market as you wait for your preferred party to get back in office. The old saying “it’s not about timing the market but TIME IN the market that matters” holds true with this historical data.
Vote For Long-Term Planning
While elections have become more contentious, it is important to remember that our financial lives are not broken up into four-year terms. The financial goals we are investing for today may have time horizons of 30+ years, and your retirement alone could span several presidencies. As you saw above, financial markets over the long-term do not care who the president is or which party controls Congress.
Be careful to use the four most dangerous words that an investor can utter: “this time is different.” Yes – our nation is in unchartered territory in a number of different areas, but history suggests that U.S. stocks have climbed the proverbial “wall of worry” many times before.
We believe it is important that you get out and vote during the upcoming election! But when it comes to your finances, we would encourage our clients to continue being long-term “independent” investors.
About the Author
Matt Price serves as a Partner and Managing Director for The Price Group of Steward Partners. He resides in Houston with his wife, Emily, their four children and "Fisher" the family golden retriever. Matt studied at the University of Pennsylvania – Wharton School of Business for his Certified Investment Management Analyst (CIMA®) designation after receiving his undergraduate degree from the University of Tennessee - Knoxville. Over the past 12 years, Matt has helped families make high quality, common sense decisions regarding their wealth and their legacy. Matt firmly believes everyone needs a wealth coach!
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The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
Matt Price is a Wealth Manager with Steward Partners participating in the Steward Partners Portfolio Management program. The Portfolio Management program is an investment advisory program in which the client’s Wealth Manager invests the client’s assets on a discretionary basis in a range of securities. The Portfolio Management program is described in the applicable Steward Partners ADV Part 2, available at https://adviserinfo.sec.gov/Firm/283004 or from your Wealth Manager.
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