Election Years & Market Performance
By Clear Perspective Advisors on July 3, 2024
10 Weeks Until the Next Debate
Investors have combated many different factors in the first half of this year. From easing inflation and the Fed remaining in the spotlight to strong equity performance from the ever-growing artificial intelligence theme, discussion topics have not lacked in 2024. The wealth of topics will not slow going into the fall season, with the 2024 U.S. presidential election slated for later this year.
Last week was the first of two debates between Donald Trump and Joe Biden. Investors will now need to wait till September 10 to listen to the two candidates again, with many political events in the interim. Presidential election years come with jitters; however, historical evidence provides support that market implications from election years are minimal. We thought it would be timely to come back to this discussion and share new ideas surrounding markets and investing in such years.
Markets See Positive Returns in Presidential Re-Election Years
It is difficult to argue against strong data: the S&P 500 has increased in 13 straight presidential re-election years and has averaged a 15.8% annual return in these years since 1944. 2024 is shaping up to be one of the best performing re-election years, with the S&P 500 up 14.4% in the first half, finishing as the second-best first-half presidential re-election year since 1964 for the index.
Presidential re-election years tend to bode well for equity markets since incumbent presidents do what they can to win over the country, and thus re-election. President Biden has provided stimulus through a few avenues, such as student loan forgiveness, infrastructure spending and heighted oil production to keep gasoline prices low. Increasing spending and productivity helps drive equity markets higher.
Comparing relative market performance in presidential re-election years to open election years shows a similar story. The S&P 500 averages a 13% greater return in re-election years than open election years, likely due to incumbent presidents putting forth policy to assist re-election efforts.[1]
Chart 1: Presidential Re-Election Years See Strong Equity Performance[2]

Election Year ≠ A Stagnant Fed
The federal reserve operates as an independent government agency with no political leaning. Fed Chairman Jerome Powell mentioned in a 60 Minutes interview earlier this year that, “We do not consider politics in our decisions. We never do. And we never will.”[3] Investors wonder how the Fed will operate later this year going into the election, especially with the November FOMC meeting falling a day after the election.
Can, or will, the Democrats pressure the Fed into cutting rates near the election to assist the economy? There may not be inherent pressure from the incumbent party, but it is not out of the ordinary for interest rate cuts to come during election years, especially in the second half of the year.
Economic and Inflation Trends vs. Election Outcomes
Investors tend to weigh too much impact on election outcomes relative to factors that truly affect market performance, such as economic growth, inflation expectations and corporate profits. Which party controls the White House and Congress has much less statistical significance on market performance compared to economic factors like economic growth and inflation.[4] Analyzing the economic environment, focusing on the full investment horizon and fundamental company performance remains a strong choice in election years. Looking at history, stocks have trended higher regardless of which party has been in office.
Chart 2: Through Differing U.S. Political Leaders, Stocks Still Rise[5]

Look for Opportunities
This fall will bring an array of headlines and news stories that may have short-term market implications. Finding short-term mispricing for long-term investments can be especially numerous in volatile environments, such as presidential election years. The 2024 race is likely to be close again, following 2016 and 2020 where both elections were decided between less than 80,000 total votes across four states. We plan to remain attentive and look for quality buying opportunities amid short-lived volatility.
[1] Source: Strategas. As of June 2024.
[2] Source: FactSet. As of July 1, 2024.
[3] Source: Bloomberg. As of February 8. 2024.
[4] Source: US Bank. As of June 21, 2024.
[5] Source: Capital Group. As of March 7, 2024.