Thanks for taking the bait. Positive stock market performance for 2024 has been celebrated by most investors, but the rationale behind the rally is where we tend to see a spectrum of opinions. I have personally heard clients laud their candidate of choice as the primary tailwind… from both sides of the aisle. It does make for an interesting conversation; there has been and there always will be speculation about how one party or one candidate might impact the economy of markets. Some of this dialogue is mere conjecture among news (entertainment?) outlets while some opinions are formed based on current or expected policy changes. What is often missing from this chatter is actual data. That’s why we’re here.
If you look at the chart below published by RetirementResearcher.com, you will notice they have listed four political scenarios and market outcomes from 1926 through 2023: What party is in the White House, and did that party also control both House and Congress?
| Situation | Number of Years | S&P 500 Index Annual Average Return |
| Unified Republican | 13 years | 14.52% |
| Unified Democrat | 36 years | 14.01% |
| Divided with Republican President | 34 years | 7.33% |
| Divided with Democratic President | 15 years | 16.63% |
Data from 1926 through 2023. Unified government means that the Presidency, the House of Representatives and the Senate are all controlled by a single party. Divided government means that at least one houses of Congress or the Presidency is controlled by the other party. Indexes are not available for direct investment. For educational purposes only. Source.
The first observation is that both Republican and Democratic Presidents have remarkably similar performance, but there is significant disparity between the parties when they do not control Congress. Most interesting is the outperformance of Democratic Presidents in a divided Congress.
Our conclusion is the following: the sample size of administrations is far too small to make any reasoned conclusion. More importantly, we must always remember that markets are rarely measuring today, they are often looking at the coming months and years for anticipated economic performance. We believe it is not only irrational, but more than likely irresponsible, to base long-term investment decisions on the outcome of political races. The results above do not point to any reasonable conclusions that would shape our or any person’s investment outlook for the next four-year period.
