Stocks and the Presidency: A Historical Overview of Market Performance

As we gear up for another presidential election in the United States, it’s essential to focus on the historical performance of the stock market under different administrations. A report from Deutsche Bank provides illuminating context, revealing that the S&P 500 has typically enjoyed robust annualized double-digit returns under various presidents since the Great Depression—with two notable exceptions: Herbert Hoover and Richard Nixon.

Historical Performance of the S&P 500

Jim Reid, Deutsche Bank’s global head of macro and thematic research, recently highlighted that, barring those two presidencies, the stock market has reaped considerable gains under U.S. leadership. Most presidents since 1933 have overseen a consistently bullish environment, characterized by annualized total returns that ranged from 10% to 17%.

In fact, “thirteen of the last fifteen U.S. presidents have benefited from annualized returns in this range,” Reid indicates. That’s a testament to the resilient and unique nature of the U.S. economy, especially during periods of relative global stability.

Exceptions to the Rule

However, it’s essential to note the stark outliers—the presidencies of Hoover and Nixon. According to Reid, these administrations were plagued by economic disasters largely outside the president’s control: the Great Depression for Hoover and the 1973 oil shock for Nixon. These events overshadowed their tenures, leading to significant market downturns.

The performance during Hoover’s administration stands out dramatically when viewed alongside the preceding Calvin Coolidge, whose policies had fueled a bubble leading to the stock market crash of 1929. As Reid explained, “Hoover had a challenging legacy to deal with,” as the burdens of past decisions weighed heavily on his administration’s performance. On the other hand, Nixon’s tenure was marked by inflation and economic turmoil, underscoring the complexities of any presidency.

Continuing Trends

Looking at more recent history, the S&P 500 performed well under former President Donald Trump, with an impressive annualized return of 16%. In contrast, current President Joe Biden has seen a slightly lower annualized return of about 14%. This suggests that, at least from a historical perspective, regardless of political affiliation, presidencies typically engage with challenged economies that impact stock market performance.

What Lies Ahead?

With the upcoming elections on November 5, Americans face a choice between Vice President Kamala Harris and former President Trump. The stakes are high. As Reid warns, the markets are brace for a possible shift in policies and regulatory environments, which could have dramatic implications for the future of U.S. investments.

Current market trends, including a two-year bull market and a remarkable 22.7% increase in the S&P 500 thus far this year, indicate an economy that is holding strong despite uncertainties. Those keen on investment must remain aware, not only of the political implications of the election ahead but also the external events that have historically dictated the direction of the economy, often with little regard to presidential intentions or capacity for intervention.

The Bigger Picture

Ultimately, market performance is often distanced from who occupies the Oval Office. Reid suggests that “events might be more likely to dictate big-picture market performance under the next president, with policy probably playing a smaller role.” This should serve as a powerful reminder for investors: the tumult of international events, market corrections, and occasional crises often supersede the strategic moves of any singular political figure.

With the election rapidly approaching, it is essential for investors to maintain their focus on long-term objectives and to remain grounded in traditional financial principles. History has shown that while politics can sway short-term sentiment, its ultimate impact on market performance may be far less predictable than history suggests.

Conclusion

As we evaluate the potential outcomes of the upcoming election, let’s approach the market with a discerning eye. Ensuring we remain focused on sound investment strategies will be crucial, regardless of which political party claims victory. The historical trends noted by Deutsche Bank act as both a guide and a cautionary tale—reminding us that while the landscape may shift, the fundamentals of investing remain constant.