As Americans head to the polls this Tuesday, concerns are rising about the potential risks to the stock market. However, history tells a different story: Election days have rarely been a ma
Despite the usual election-day drama, the S&P 500 has posted gains on 8 out of 10 election days since 1980. When we look at the broader period surrounding the elections, including the days leading up to and following the vote, the results are more mixed, with the market seeing declines about half the time. However, if we take a longer view, things start to look better
Since 1960, the S&P 500 has averaged an impressive 10.68% return in the year following an election, right on par with the market’s long-term average. While elections can certainly bring short-term volatility—especially if the results are contested or unclear—they rarely disrupt the long-term market trend.
“We remain mindful that while elections can trigger short-term repricing, the S&P 500 tends to post gains in all balance-of-power scenarios,” says Lori Calvasina, Head of U.S. Equity Strategy at RBC Capital Markets. “What matters most in the long term is the underlying fundamentals.”
In fact, the effects of elections on the stock market are no different from other global risks—such as geopolitical tensions, natural disasters, or strikes. What investors care about most is how these risks impact future corporate earnings.
When it comes to elections, this often means a shift in the political landscape and the potential for policy changes that could impact the corporate environment. Historically, a split-party government has been the most favorable for markets, as it typically leads to less drastic policy changes.
“Checks and balances, often termed ‘gridlock,’ help protect the things investors care about most: a stable economy, consumer confidence, and long-term revenue and profit growth,” notes John Stoltzfus, Chief Investment Strategist at Oppenheimer & Co.
Looking back at the past few presidential cycles, research from Keith Lerner, Co-Chief Investment Officer at Truist, reveals that the S&P 500 has posted strong returns regardless of the party in power. From the day Barack Obama was elected to the day Donald Trump took office, the S&P 500 grew at an annualized rate of 13%. From Trump’s election to Biden’s win in 2020, that growth accelerated to 14%. Since Biden took office, the market has seen an average annual return of 16%. These returns are firmly within the typical range.
Technology stocks, particularly in the Information Technology sector (XLK), have been the primary beneficiaries of these market gains. Despite shifts in presidential administrations, the tech sector has consistently outperformed, as it has been the source of significant earnings growth in recent years.
“The leadership in the White House has done little to disrupt the tech bull market of the last 15 years,” says Lerner. “No matter the outcome on Election Day, this long-term trend appears poised to continue.”
Michael Antonelli, market strategist at Baird, echoes this sentiment: “The key driver behind the stock market’s upward trajectory is simple. It’s not who wins the election—it’s that people at companies keep doing their jobs, creating products and services. Shareholders benefit from that work, regardless of who’s in office.”
In short, while elections might stir some short-term volatility, they are unlikely to derail the broader market trends. Investors should remain focused on the fundamentals of the companies they invest in, as the real engine of the stock market is driven by people going to work, building businesses, and generating profits.
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