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Advisors - October 12, 2020

Free Guide: How Do Presidential Elections Impact the Stock Market?

Are you or your clients wondering how U.S. presidential elections affect their investments?

Every four years, uncertainty about the next president and their policies leads to further uncertainty for advisors and their clients. To help advisors understand the true impact of elections on the market, and effectively pass insights onto their clients, we studied every presidential election since 1950 — the findings may not be what you expected.

This guide answers the most common, burning questions that financial advisors hear from their clients as an election looms closer.

Download the full guide to see our findings:

Included in the guide are free-to-download visuals that can be easily shared with your clients and colleagues. Each finding and visual is data-driven and unbiased, but they are not meant to serve as investment advice.

Here’s a preview of what’s inside:

How does the market react when an incumbent or challenger is elected?

We found the market reacts differently when an incumbent president is re-elected, versus when a challenger wins. In the time between a president’s election and inauguration, average market returns are positive for incumbents and challengers — regardless of their party.

However, the market’s initial reaction is strongest when a Democrat incumbent is elected, followed by when a Republican challenger wins. Notably, the market’s initial reaction has been positive for all Republican president-elects, on average. This is in-line with the common sentiment that a Republican’s policies will be more stock market-friendly than a Democrat’s.

Market Reaction to Incumbents and Challengers Being Elected

Click to Download Visual

Initial reactions aside, the trends in the table above begin to break down during presidents’ actual time in office. Download the full report to see how.

How have other major asset classes performed under recent presidents?

Over the last three decades (during which the U.S. had four different presidents), U.S. and Emerging Market Equities have led the charge as the best performing major asset classes.

Since the early nineties, U.S. and International Equities strongly outperformed under Democrats, whilst Emerging Markets were the best performer under Republicans, on average. Notably, since George W. Bush’s 2000 inauguration, Emerging Markets have returned at least 7.5% under each president on an annualized basis, and beat out International Equities, U.S. Corporate Debt, and U.S. Treasuries.

Annualized Asset Class Returns During Each President's First Tenure in Office

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The most important finding for financial advisors and their clients: the party occupying the White House is just one of the many variables that can impact your investments.

While elections may create some uncertainty in the market, long-term investing goals and risk tolerance should remain the most important factors in your decision making process.

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