Harris Or Trump: How Do Elections And Presidents Affect The Stock Market?

Who are you voting for? 

While The Juice almost always cares about the opinions of our subscribers, in this case we don’t necessarily want an answer. 

Because—

By show of hands, who is sick and tired of politics in this country? 

Your political sentiment — be it anger, apathy or something else — aside, there is a tendency to overblow the political controversies and divisiveness of the day. To act as if they’re going to have some grave impact on our lives or, more specifically, our money. 

Complain, hyperbolize and scream till you’re blue in the face, but through it all, people keep on keeping on. And, even if some people don’t, the stock market continues to roll full steam ahead. 

Don’t believe The Juice? We would not steer you wrong. We have proof. 

But, real quick, the data we’re about to relay says nothing about volatility and fleeting moments in time. The market drops, dives, tanks and corrects all the time. Election year or not. 

So, if Trump threatens to deport everyone who’s less than five feet tall or Harris says she’s going to double tax your kid’s lunch money and the market reacts to the downside, it’s no different than how the market reacts to, say, a poor consumer confidence reading. Shit happens. Election year or not. 

Over the long-term, stocks go up. At least historically. The Juice has no reason to believe we’ll see that history drastically change anytime soon. Housing prices skyrocket and inflation doesn’t feel like it’s actually cooling on the ground, but the stock market rebounds time and time again and keeps moving higher. Especially the market leaders. 

This should be music to the ears of Trump haters, Kamala lovers and the inverse. As long as you’re a long-term investor with a long-term plan, an election year shouldn’t have much of an impact, if any, on your long-term investing. 

Some election year stock market statistics, because they’re fun. 

Looking at stock market returns between elections. So, in years one, two, three and four after a presidential term begins. 

• In year one post-election, stocks go up, on average, 8.3%.
• In year two, they rise, on average, 3.4%.
• In year three, they increase by, on average, 14.7%.
• In year four — so, in an election year — stocks head higher by, on average, 9.1%. 

Stocks, as represented by the S&P 500. The time frame — between November 1950 and November 2023. 

The Juice looked at sector performance in election years since 1976 and found absolutely no rhyme or reason. 

For example, clean, or alternative energy, performed better under Trump, while the defense and traditional energy sectors did better under both Biden and Obama. Name the sector and it’s a mixed bag with up years and down years scattered across years with about zero regard for the political party occupying the White House. 

How about when we look at the composition of Congress relative to who’s in the White House? 

Between 1926 and 2023—

• Republicans controlled the White House and both chambers of Congress during 13 years. During those years, the average annual return of the S&P 500 was 14.5%. 
• Democrats controlled the White House and both chambers of Congress during 36 years. During those years, the average annual return of the S&P 500 was 14.0%.
• Congress was divided with a democratic president for 34 years. During those years, the average annual return of the S&P 500 was 7.3%.
• Congress was divided with a republican president for 15 years. During those years, the average annual return of the S&P 500 was 16.6%.

Other interesting tidbits to consider—

• When the S&P 500 goes up during the three months ahead of an election, the incumbent party has won 20 out of 24 times since 1936. 
• In 1968, Lyndon B. Johnson decided to not run for re-election and the man who would have been the democratic nominee for president, Bobby Kennedy, was killed. The stock market went up by 15% after LBJ’s announcement through the end of 1968. 

Sound familiar? 

It’s pretty funny actually. Joe Biden decided to drop out of the race on Sunday, July 21st. 

The SPDR S&P 500 ETF (SPY) opened the next trading day (Monday, July 22nd) at $553.00 and actually hit an intraday high of $555.27, closing at $554.65. 

This past Friday (August 16th), SPY closed at $554.31. 

Even with the carnage of August 5th, we’re at the same level in the S&P 500 today as we were when Biden dropped out. If the market heads higher from here, the historical odds appear to be in favor of Kamala Harris, the nominee of the incumbent democratic party. 

What actually happens remains to be seen. We’re staying the course in our portfolio irrespective of any election noise or election outcome. 

The Bottom Line: What do with this data? The Juice thinks nothing other than mention it to interested friends who say they’re going to sell all of their stocks if so and so wins. 

Investing based on what’s happening in Washington is akin to trying to time the market. Market timing is such a bad strategy we hesitate to even call it a strategy.

To that end, this might be the most important datapoint of them all: Between 1994-2023, if you missed out on the 10 top-performing days in the stock market, you have generated a return of 54% less than if you had stayed put.

So, yeah, craft a solid plan and stick to it. Stay invested, no matter what’s happening politically.

• What Are Dividend Growth Stocks With Examples?
• Beyond Traditional Investments: Embrace Diversity
• Check Out The Juice’s Favorite ETF Screener
• How To Generate Income From High-Growth Tech Stocks