During election season, an overwhelming barrage of messages inundate us. News networks provide an endless supply of political reporting. Video ads stream continually on our televisions, computers, billboards, and devices. It is nearly inescapable. The messages naturally charge our emotions. We feel an urgency to act. Indeed, we should care about our country’s leadership and the future of our nation. It is normal to feel concerned that the election’s outcome will impact our financial future.

Perspective From the Past

With angst elevated in the runup to the presidential election, what precedent can past elections provide for us today regarding the stock market? Be relieved. Markets tend to go up regardless of which party is in power. This is further extrapolated below, but first we must remind ourselves what investing is about. As investors, we invest in companies, not candidates. The presidency is just one variable that sways stocks. The gamut of market influences includes interest rates, congressional actions, the price of oil, geopolitical events, natural disasters, pandemics, global politics, wars, famines, inflation, supply chains, and more.

Historically, over the long haul, the stock market has climbed regardless of which party occupies the Oval Office.

Again, Fear Not – The Market Rewards Investors

While many circumstances can move markets, politics are not usually a main factor. Below are two poignant charts from Dimensional Fund Advisors, going back nearly 100 years, that show how stock market returns correlate with politics.

Stock Market and Party Control of Congress

First, we can see stock market returns amid congressional power. The key takeaway, of course, is the stock market rewards investors despite party control – red, blue, or a mix of the two.

Stock Market and Party Control of the Presidency

The next chart depicts presidential power with stock market returns. Here, power has been traded back-and-forth over the past 100 years, and yet the stock market maintained a steady trajectory.

These visualizations are reassuring. Often, our natural tendency is to believe the market will struggle if the other side wins. Historically, that has not been the case. Whether leaning right or left, we need not fret. The market has climbed irrespective of political persuasions, rewarding investors – because investors invest in companies, not political parties.

Both red and blue have run positively for the stock market across a century of historical returns. With frequent elections in our society, feelings of angst are natural from seemingly urgent rhetoric. Artificial intelligence will likely add complexity to ads and messages in the future. Certainly, we should care about our nation and democracy. As investors, as this election season unfolds, let us gain reassurance from a long precedent of past presidencies that the market does not move on politics alone.

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Disclosures

Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal. There is no guarantee that any investment strategy will achieve its objectives or that any forecasted market trends will materialize. The information contained in this newsletter is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any security.

The views expressed are those of the author and are based on current market conditions. They are subject to change without notice. Any reference to historical performance, including market returns under different political administrations, is for illustrative purposes and does not predict future results.

The data presented, including references to third-party sources such as Dimensional Fund Advisors, is believed to be accurate, but no warranty is made regarding its accuracy or completeness. Consult with your financial advisor before making any investment decisions.

MarsJewett Financial Group, Inc. is a registered investment adviser. For additional information about MarsJewett Financial Group, Inc. including its services and fees, you can request the firm’s disclosure brochure using the contact information contained herein or visit advisorinfo.sec.gov.