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How does the stock market historically perform during election years?

We’re all a little tense about Election Day tomorrow and what surely will be an all-out legal brawl to see who occupies the White House next.

But I wanted to offer some insight not from a political perspective but by looking at the economy. Specifically, I wanted to turn the spotlight on our stock market during election year cycles.

First off, do stock markets typically rise or fall during election years? 

From 1928 to 2019, the average S&P 500 return was 11.57%. And during election years during that same period (except up to 2016), the annual average return is 12.76% – a small +1.19% bump.

Now, let’s look at the individual S & P 500 stock market gains and losses for election years:

1928    43.81%            Hoover vs. Smith

1932    -8.64%             Roosevelt vs. Hoover

1936    31.94%            Roosevelt vs. Landon

1940    -10.67%           Roosevelt vs. Willkie

1944    19.03%            Roosevelt vs. Dewey

1948    5.70%              Truman vs. Dewey

1952    18.15%            Eisenhower vs.Stevenson

1956    7.44%              Eisenhower vs.Stevenson

1960    0.34%               Kennedy vs. Nixon

1964    16.42%             Johnson vs. Goldwater

1968    10.81%             Nixon vs. Humphrey

1972    18.76%             Nixon vs. McGovern

1976    23.83%             Carter vs. Ford

1980    31.74%             Reagan vs. Carter

1984    6.15%               Reagan vs. Mondale

1988    16.54%            Bush vs. Dukakis

1992    7.49%               Clinton vs. Bush

1996    22.68%             Clinton vs. Dole

2000    -9.03%              Bush vs. Gore

2004    10.74%             Bush vs. Kerry

2008    -36.55%            Obama vs. McCain

2012    15.89%             Obama vs. Romney

2016    11.77%             Trump vs. Clinton

2020    ?                       Trump vs. Biden

As you can see, the S&P 500’s performance swings wildly with no real pattern. 

It is notable that when Obama ran for the first time in 2008, the S&P fell more than 36% that year, an all-time low for election years. 

But by the time he ran again in 2012, that metric was up almost 16%.

So, you may be wondering if a Republican or Democratic president is better for the stock market? 

In reality, whether a President was Red or Blue didn’t make a huge impact on the stock market, and the S&P 500 has flourished (or stumbled) under both Republicans and Democrats. 

This may not put your fears at ease, but we can never have enough accurate information.

That being said, I hope each and every one of you are planning to get out and vote tomorrow! 

Sincerely,

-Jason Matthews

Founder and President,

Matthews Financial & Insurance Solutions