Every four years, our friends down south take to the polling stations to determine the future leader of their country. American and Canadian investors alike will be watching closely, asking: how will the election affect the stock market? Many will speculate, and many will be burned as the financial markets adapt to the outcome.  To avoid being burned, you must make informed decisions, and in order to make informed decisions, it is critical that you approach the election with the right mindset.

Key Things To Remember:

1) Try your best to remove political expectations from your investment decisions.
2) Do not try to predict market movements during the US election.
3) Remember that the stock market goes up on average over time, no matter which party is in power.

How Does The Election Affect The Stock Market

According to a report by First Trust Portfolios using data pulled from Morningstar, the market has been positive overall in 19 of the last 23 election years from 1928 to 2016, only showing negative returns four times.

Year Return Candidates
1928 43.6% Hoover vs. Smith
1932 -8.2% Roosevelt vs. Hoover
1936 33.9% Roosevelt vs. Landon
1940 -9.8% Roosevelt vs. Willkie
1944 19.7% Roosevelt vs. Dewey
1948 5.5% Truman vs. Dewey
1952 18.4% Eisenhower vs. Stevenson
1956 6.6% Eisenhower vs. Stevenson
1960 0.50% Kennedy vs. Nixon
1964 16.5% Johnson vs. Goldwater
1968 11.1% Nixon vs. Humphrey
1972 19.0% Nixon vs. McGovern
1976 23.8% Carter vs. Ford
1980 32.4% Reagan vs. Carter
1984 6.3% Reagan vs. Mondale
1988 16.8% Bush vs. Dukakis
1992 7.6% Clinton vs. Bush
1996 23.0% Clinton vs. Dole
2000 -9.1% Bush vs. Gore
2004 10.9% Bush vs. Kerry
2008 -37.0% Obama vs. McCain
2012 16.0% Obama vs. Romney
2016 12.0% Trump vs. Clinton

Data Source: Morningstar

How Do Markets Perform Under Different Administrations?

Markets tend to do well under all administrations with slight variances. Ben Carlson CFA, a prominent wealth blogger, shared this chart in a recent blog post highlighting long-run returns. The chart shows how $1 would have grown over time under various political environments.

Investment Returns By President

How To Manage Your Investments During An Election Year

Should you make changes to your asset allocation during an election year or after a new president is elected? Probably not. Focusing on what you can control is key when investing for the long-term. Even if the market is caught off-guard by the election results (as evidenced in 2016 when President Trump won), the shock will likely be temporary. It can be hard, but it’s really important not to allow personal feelings about politics interfere with your financial plan.

The Information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. 

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