Politics and Your Portfolio: Red, Blue, or Green?

With the election fast approaching and political drama running the news narrative, many people wonder how they should change their investment strategy given a particular election outcome.  Regardless of your political position, we wanted to investigate how mixing politics and investing can impact a long-term investment strategy.

Here are some of the key takeaways:

Regardless of political party, markets tend to rise over time, with strong markets during both Republican and Democrat presidencies.

Going back to 1950, we looked at how a portfolio would have done had you uninvested while either Republican or Democrat was in office.   Left alone in the stock market, $10,000 in 1950 grew to over 3 million dollars by Q1 2024.  By only investing during either Republican or Democrat presidencies, most of that return is erased.

Historically, we’ve seen higher average annual returns with a divided Congress, where one party controls the House or Senate, and the other party holds a majority in the second chamber. Lower returns have come during Democratic majorities in both the House and Senate, while higher returns under Republican control of both congressional chambers. In any case, the market has historically been positive under all six government compositions.

Since 1952, Democratic presidents winning reelection has historically led to the highest S&P 500 returns in this post-election period. However, lower returns have tended to occur when the winning candidate was neither an incumbent nor a challenger, such as in election cycles that replace a termed-out president.

Ultimately, it’s important to stay invested and avoid timing markets. When you invest in the market, you are buying a part of a company’s corporate earnings power. The reality is that regardless of who the president is, you and I will both continue to wake up in the morning, put on clothes, eat food, drive ourselves around, and consume goods and services throughout the day. If you believe those goods and services will continue to get more expensive over time with inflation, it’s important to invest in that growing stream of earnings, regardless of who is in office. 

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Advisory services offered through National Wealth Management Group, LLC, a Registered Investment Adviser. This information is intended for educational purposes and is not intended as a recommendation to buy or sell securities. Investing involves risk. Before investing, you should consult with a financial advisor to determine how a specific investment strategy fits your personal goals and objectives.