Is Donald Trump or Kamala Harris Better for Stocks? Statistically, One Party Has Overseen a Considerably Higher Average Annual Return Over the Last Century.
2024-10-13 12:06:00
In a little over three weeks, voters from across the country will head to the polls to determine the direction of our great country over the coming four years.
Although not every action taken by the incoming president and Congress will have a bearing on Wall Street, the fiscal policy proposals ultimately put into place by the incoming administration will impact corporate America and the stock market.
Over the last two presidential terms, investors have done quite well. During Donald Trump’s four years in the Oval Office, the ageless Dow Jones Industrial Average (DJINDICES: ^DJI), broad-based S&P 500 (SNPINDEX: ^GSPC), and innovation-inspired Nasdaq Composite (NASDAQINDEX: ^IXIC), respectively, gained 56%, 67%, and 138%!
Based on data analyzed from 1926 through 2023 by Retirement Researcher, the average annual return for the S&P 500 under a unified (i.e., one party controlling both houses of Congress) or divided Congress is as follows:
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Unified Republican: 14.52% average annual return over 13 years
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Unified Democrat: 14.01% average annual return over 36 years
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Divided with Republican president: 7.33% average annual return over 34 years
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Divided with Democratic president: 16.63% average annual return over 15 years
Using this data, we can see that Republican presidents have overseen a very respectable 9.32% average annual return in the S&P 500 since 1926. However, Democratic presidents have enjoyed a considerably more robust average annual return of 14.78% in the S&P 500 during 51 years in the Oval Office.
Based purely on historical data and nothing else (note the italics!), a Kamala Harris victory in November would seem ideal for Wall Street.
Nevertheless, patience and perspective are far more important in determining investment returns than which party controls the Oval Office.
Historically speaking, time, and not any particular political party, is the greatest ally for investors. With periods of economic expansion lasting considerably longer than recessions, investors who wager on the U.S. economy to expand over long periods are set up for success.
What’s more, an extensive study updated earlier this year by Crestmont Research examined the rolling 20-year total returns, including dividends, of the S&P 500 dating back to the start of the 20th century. Even though the S&P didn’t exist until 1923, researchers were able to track the total return of its components from other indexes to 1900. This research yielded 105 rolling 20-year periods (1919-2023).
Crestmont found that all 105 rolling 20-year periods produced positive total returns. Put another way, if an investor had, hypothetically, purchased an S&P 500 index fund at any point since 1900 and held that position for 20 years, they made money, without fail, every time.
Despite the uncertainty that can accompany elections, investors who can exercise patience and perspective are perfectly positioned to thrive whether Donald Trump or Kamala Harris wins in November.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Is Donald Trump or Kamala Harris Better for Stocks? Statistically, One Party Has Overseen a Considerably Higher Average Annual Return Over the Last Century. was originally published by The Motley Fool
