Every four years, the United States gets consumed by the frenzy of presidential elections. It’s everywhere: TV, social media, and the minds of investors. Whether you’re on Main Street or Wall Street, the speculation about how the market will react to the latest poll or debate is impossible to escape. But there’s a simple truth that often gets lost in the noise—which political party is in office has little effect on the stock market.

For all the headlines and heated debates, historical data tells a clear story: a 60/40 portfolio has delivered average annual returns of around 8%, regardless of which party holds the White House. On top of that, election years are no different from non-election years. Although stock markets can show volatility during election years, and that can be uncomfortable, it doesn’t tell the whole story. Market returns during election years have also historically averaged 8%.

One of the most important lessons for long-term investors is that reacting to short-term political news is rarely a good idea. Trying to time the market based on election outcomes can lead to costly mistakes. Studies consistently show that missing just a few of the market’s best days—many of which often come after periods of volatility—can dramatically reduce your long-term returns.

For example, take this headline from Bloomberg back in 2022 predicting a 100% chance of a US Recession within a year.

For those keeping score the S&P 500 is up 61% as of 9/30/24 since that article came out.

Instead, the better course of action is often to stay invested. The stock market is priced at positive expected returns. In other words, over the long run, stocks are expected to grow in value. The market’s historical average return of 8% reflects this.

If you stay invested through election cycles, avoiding the temptation to sell or make drastic changes based on who wins or loses, you’re more likely to capture those long-term returns.

Whether it’s a blue wave, a red surge, or a contested result, research shows none of it changes the fundamental rules of investing. Stick to your plan, and let time—and the market’s resilience—work in your favor. Presidential elections come and go, but the market’s ability to deliver positive long-term returns remains.

Hill Investment Group is a registered investment adviser. Registration of an Investment Advisor does not imply any level of skill or training.  This information is educational and does not intend to make an offer for the sale of any specific securities, investments, or strategies.  Investments involve risk, and past performance is not indicative of future performance. Consult with a qualified financial adviser before implementing any investment or financial planning strategy.

Hill Investment Group