Stock Market Performance By U.S. President: Which Party Gets Better Returns? (2024)

FAQs

Stock Market Performance By U.S. President: Which Party Gets Better Returns? ›

The current political environment in many developed nations has caused us to consider the robustness of the findings of Santa-Clara and Valkanov (2003), who present evidence that US stock market returns are much higher under Democratic presidents than under Republican presidents.

It is well known that the stock market tends to respond more favorably to the election of a Republican president. 4 This evidence is in line with our model: the election of a low-tax party is good news for shareholders because lower taxes imply higher after-tax cash flows.

There doesn't seem to be a direct link between the occurrence of an election year and market outcomes. The stock market, as measured by the S&P 500, was down in three of the 16 presidential election years since 1960. It experienced negative returns in seven of the 16 non-presidential election years.

The S&P 500 has achieved an average CAGR of 9.8% under Democratic presidents and 6% under Republican presidents. However, the index has achieved a median CAGR of 8.9% under Democratic presidents and 10.2% under Republican presidents.

They find that Republican candidates win the presidency when electors prefer less insurance and more business risk. As a result, average stock returns are lower when the president is a Republican.

Since World War II, the United States economy has performed significantly better on average under the administration of Democratic presidents than Republican presidents.

Economic research has shown that the economy generally does better under Democrats than Republicans but that inflation is constantly in flux, and its causes are often difficult to track. Presidents have limited control over inflation, but it can still affect their election performance.

The best stock market performance by a president in the post-World War II era came under Bill Clinton; the S&P 500 was up a whopping 210% in his two-term presidency, from 1993-2001. The second-best return under a U.S. president? That would be Barack Obama's eight-year tenure when the S&P was up 189% from 2009-2017.

Those dollars started to have more impact in 2023, and may again in 2024, according to Haworth. As for the stock market during Biden's tenure, it trended higher, but with significant volatility. The benchmark S&P 500 generated impressive returns of 28.7% in 2021 and 26.29% in 2023.

Political risk can come from any number of sources, such as: Policy decisions and shifts affecting things like trade tariffs, taxes, labour conditions, privatisation and regulation. Political leadership changes and government instability.

Who was the president when the stock market crashed? ›

In October, 1929, the bubble burst, and in less than a week, the market dropped by almost half of its recent record highs. Billions of dollars were lost, and thousands of investors were ruined. After the stock market crash, President Hoover sought to prevent panic from spreading throughout the economy.

Expectations for return from the stock market

Most investors would view an average annual rate of return of 10% or more as a good ROI for long-term investments in the stock market. However, keep in mind that this is an average. Some years will deliver lower returns -- perhaps even negative returns.

That depends on your risk appetite, and the ability to hold on to stocks during the difficult market conditions. But historically, a return of 12-15% per annum compounded over the long term is considered very good, as this will grow exponentially as time goes by.

Abraham Lincoln has taken the highest ranking in each survey and George Washington, Franklin D. Roosevelt, and Theodore Roosevelt have always ranked in the top five while James Buchanan, Andrew Johnson, and Franklin Pierce have been ranked at the bottom of all four surveys.

Securities and Exchange Commission (SEC)

It regulates stock exchanges, options markets, and options exchanges in the United States and other electronic securities markets and businesses. It also oversees financial advisors who are not subject to government oversight. Six divisions and 24 offices make up the SEC.

Prior to the signing of the Securities Exchange Act by President Roosevelt on June 6, 1934, there was not much oversight of the United States securities market. The act created the Securities & Exchange Commission (SEC) and some regulation of large public companies really began.

Stocks are sold to institutional investors and high-net-worth individuals, but also those with far more modest means looking for income from a share of the profits, to sell the stock later at a higher price, or simply to have a say in how a company is run.

Presidents have very little impact on the stock market, but they still seem to get some credit when performance is good and more of the blame if markets are down. Typically, Congress and the Federal Reserve can play a bigger role in directly shaping markets, compared to the president.

An investor, portfolio manager, fund, or other investment specialist is said to "beat the market" by producing a better return than the market average.