It’s that time again… election time! A time when investors want to know how the market has done in the past based on what party is in the Oval Office. A time when investors try to anticipate what the market will do this time depending on who wins. And a time to consider how to potentially “election-proof” portfolios. We will cover these areas below, but be forwarned, if you do not like data, you may just want to just skip to the bottom.

Yes, the upcoming elections are highly anticipated. In fact, 83% of the general population believe this election “really matters”.i  That’s the highest percentage ever. And we can see why. Issues ranging from economic, to social, to global, to local, to environmental have polarized voters like never before.ii  The good news is that we do have the right to cast our vote. But as important as this election and our vote may be, it is our view that the outcome matters less to your investment portfolio than you may believe.

Consider these:

  • Since 1937, the Dow Jones Industrial Average (DJIA)iii has gained +9.2% with a Democratic President, and has gained +9.1% with a Republican President, thru 12/31/19.iv  
  • Since 1937, the DJIA gained +10.0% when the White House and Congress were divided by party, and has gained +8.2% when both were ruled by the same party, thru 12/31/19.v (If you include the Great Depression era from 90 years ago, the above numbers change, but that can probably be considered an outlier. And of course, past performance does not guarantee future results.)
  • 87% of the time, when the stock market is up the 3 months prior to the election, the incumbent As of September 24th, the S&P 500 indexvii since August 3rd was down -1.1%.
  • Since 1932, there have been four elections when the incumbent endured a recession while in office, and each time the incumbent was not re-elected.viii See chart below. Trump endured a recession in 2020.