Election Angst

It’s no secret that presidential elections are a source of anxiety for many investors, and that’s understandable.

For starters, headlines exacerbate concerns over perceived market volatility. And, given the potential for turnover in the White House and/or Congress, presidential elections raise the level of uncertainty around issues of national importance, including government policy on individual and corporate taxes and industry regulation. As we’ve seen in recent years, government policy can have a big impact on such critical sectors as health care and infrastructure, creating winners and losers.

As media coverage intensifies, presidential elections also shine a spotlight on our collective pain points as a nation, from kitchen-table issues to geopolitical concerns. Indeed, inflation and conflict in the Middle East and Ukraine will be among the issues dominating theconversation this election cycle.

Taxes — in particular the Trump-era tax cuts that are set to expire next year – are likely to be a focal point too. And given the large amount of U.S. debt coming due in today’s higher-rate environment, government debt and spending are likely to be talking points as well.

Source: iCapital

Off to the Races

Interestingly, out of all four years of each presidency dating back to 1930, the S&P 500 typically has performed best in the third year, posting a median price return, excluding dividends, of about 18%.

The Finish Line

So, how has the market performed in the final stretch of presidential elections and the immediate aftermath? On the whole, better than we might expect.

  • For the 60-day period leading up to Election Day, the market has tended to be relatively flat, posting a median price return of 1.7% since 1930. But the S&P 500 finished in positive territory two thirds of the time.
  • For the 60-day period following Election Day, the market has tended to rise modestly, posting a median price return of 3.2%. Decreased uncertainty around the policy priorities of the incoming administration (whether new or re-elected) has likely been a contributing factor. Once again, the market finished in positive territory two thirds of the time for the 60-day post-election period dating back to 1930.

Presidential elections can certainly contribute to market volatility. And, in fact, during the first six months of an election year, we tend to see an uptick in volatility. The good news is that most of the time the market has ended the year on a positive note. Since 1928, the median price return for the full year of a presidential election year was nearly 11%. And the market finished higher three quarters of the time.

Source: Kestra Investment Management with data from FactSet

Keep Fundamentals in Focus

While headlines may cause investors to worry, we can take some comfort in the fact that historical data going back nearly a century reveal that the market tends to come out ahead much of the time in presidential-election years.

This was certainly the case with the previous Biden-Trump matchup in 2020, although that election took place against the backdrop of the pandemic and the historic government-stimulus measures enacted in response to the crisis.

After a steep decline followed by a strong recovery in the first half of 2020, the market saw renewed volatility in the late summer and early fall. By the time Election Day rolled around, the market was in the midst of another rally. It ultimately finished the year with a price gain of more than 16%. Anyone who waited to invest until after the election had passed missed a good portion of the year-end rally.

As with other events that can contribute to short-term market fluctuations, presidential elections should not factor into asset-allocation decisions or lead to rushed decision making. Fundamentals, such as the business cycle and other economic variables, remain the primary drivers of returns during election years. As always, investors should remain disciplined and diversified.

Invest wisely and live richly,


The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Advisor Services Holdings C, Inc., d/b/a Kestra Holdings, and its subsidiaries, including, but not limited to, Kestra Advisory Services, LLC, Kestra Investment Services, LLC, and Bluespring Wealth Partners, LLC. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by any entity for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. Kestra Advisor Services Holdings C, Inc., d/b/a Kestra Holdings, and its subsidiaries, including, but not limited to, Kestra Advisory Services, LLC, Kestra Investment Services, LLC, and Bluespring Wealth Partners, LLC. Does not offer tax or legal advice.

Kara Murphy

More about the author: Kara Murphy