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Does the Market Have a Party Preference?

With the full results of the 2020 election finally in the books, investors may be worried about how the power shift in Washington could impact their investments.

There’s a common misperception that Democratic administrations are bad for investors. However, over the past 45 years, US stocks had an average annual gain of about 13% regardless of which political party was in control. 


US Stocks Have Generated Strong Returns Regardless of Government Makeup

S&P 500 Index average annual return (1975–2020)


Sources: Morningstar, Senate.gov, and House.gov as of 12/20. Indices are unmanaged and not available for direct investment. Past performance does not guarantee future results. 


Market Returns Under Democratic and Republican Presidential Terms

What if you just consider the president without Congress? Democratic presidents actually have a slight performance advantage. However, the difference in returns vanishes when you remove the outlier boom years under Bill Clinton and the Global Financial Crisis under George W. Bush. In other words, the markets really don’t have a party preference after all.


S&P 500 Index average real annual returns (adjusted for inflation) 1933–2020


Data source: Datastream Refinitiv, Robert Shiller dataset, and Schroders, 7/31/33-12/31/20. Real (adjusted for inflation) total return from first year in office to 7/31 of final year in office to exclude the election effect (President Trump’s term is shown through 7/31/20).

A financial professional can help you build a diversified portfolio that’s right for you.

S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks. 

Important Risks: Investing involves risk, including the possible loss of principal. 

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