How Elections Impact the Stock Market

With people voting in at least 76 countries in 2024, it looks to be the biggest election year in history, affecting 4.4 billion people, or 60% of the global population.¹ Attention will especially be focused on the US, where the vote for president is expected to again be close. The anticipation building up to elections often brings with it questions about how financial markets will respond. But the outcome of an election is only one of many inputs that can impact stocks and bonds.

The history of the stock market going back to 1926 shows that returns in months when presidential elections took place don’t reflect any consistent patterns. 

What History Tells Us about US Presidential Elections and the Market 

How Do Presidential Elections Affect the Market?

During a presidential election year, it’s natural for investors to seek a connection between who wins the White House and which way stocks will go. Some may even wonder whether they should get out of the stock market altogether before the ballots are counted. But a look at history may offer some reassurance. Remember, shareholders are investing in companies, not politicians, and stocks haven’t shown much of a party preference.

It’s natural for investors to look for a connection between who wins the White House and which way stocks will go. Some may even wonder whether they should get out of the stock market altogether before the ballots are counted. But a look at history may offer some reassurance. Remember, shareholders are investing in companies, not politicians, and stocks haven’t shown much of a party preference. Regardless who wins, nearly a century of returns shows that stocks have trended upward. 

 HYPOTHETICAL GROWTH OF $1 INVESTED IN THE S&P 500 INDEX 

 1926–2023 

Shareholders are investing in companies, which focus on serving their customers and growing their businesses, regardless of who is in the White House. 

US presidents may have an impact on market returns, but so do many other factors—the actions of foreign leaders, interest rate changes, changing oil prices, and technological advances, just to name a few. 

From 1926 to 2023, stocks trended higher regardless of whether Democrats or Republicans controlled the House and the Senate, or whether control was mixed. 

Stocks have rewarded disciplined investors for decades, through both Democratic and Republican presidencies. 

What About Which Party Controls Congress?

Control of Congress hasn’t been a reliable market gauge either. Nearly a century of US stock market data suggests that making investment decisions based on which party controls the House or the Senate is unlikely to lead to better outcomes.

Growth of $1 Invested in the S&P 500, 1926–2023

From 1926 to 2023, stocks trended higher regardless of whether Democrats were in charge of Congress or Republicans controlled the House and the Senate. Markets also generally rose when control of Congress was mixed.

Should I Brace for Rocky Markets During an Election Month?

You may wonder: What about returns during an election month—when uncertainty may be peaking? Data shows returns in election months have not tended to be that different from returns in any other month. When looking at a broad-market US index going back to 1926, the results don’t reflect any consistent pattern. 

Monthly Returns for the S&P 500, 1926–2023

This chart shows a broad-market US index, with each horizontal dash representing a month, arranged from left to right by market return in 1% increments. 

Most election months haven’t produced extreme returns in one direction or the other. 

The winning party hasn’t been a reliable driver for the direction or magnitude of market movements in election months, either. 

The history of market behavior during election months makes a strong case for sticking with a plan to achieve long-term goals. 

What’s an Investor to Do?

While it may be natural to wonder whether you should make an investment decision based on how you think elections might unfold, data suggests such moves are unlikely to result in better returns. On the contrary, these moves may lead to costly mistakes, like getting out of stocks based on a hunch and missing rewarding returns. There is a stronger case for investors to look past elections and maintain a steady approach to markets—in other words, make a long-term plan and stick to it. As Dimensional Founder and Chairman David Booth has said, “Vote with your ballot, not your life savings.” After all, the market isn’t a reflection of who gets elected president but of the efforts of companies to solve problems and provide goods and services. In the long run, innovation succeeds, no matter what politicians do.

Disclosures:

1. Sources: International Institute for Democracy and Electoral Assistance, World Bank. Population figures for 2024 are based on most recently reported World Bank figures, as of January 2024.

Past performance is not a guarantee of future results. Indices are not available for direct investment. 

In USD. Dashes representing returns for a given month are stacked in ascending order of return within

The Fama/French indices represent academic concepts that may be used in portfolio construction and are not available for direct investment or for use as a benchmark. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. 

Results shown during periods prior to each index’s inception date do not represent actual returns of the respective index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical and is provided for 

Figure 1: In USD. Growth of wealth shows the growth of a hypothetical investment of $1 in the securities in the S&P 500 index. S&P data © 2023 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Data presented in the growth of wealth chart is hypothetical and assumes reinvestment of income and no transaction costs or taxes. The chart is for illustrative purposes only and is not indicative of any investment. 

Figure 2: In USD. Growth of wealth shows the growth of a hypothetical investment of $1 in the securities in the S&P 500 Index. Data presented in the growth of wealth chart is hypothetical and assumes reinvestment of income and no transaction costs or taxes. The chart is for illustrative purposes only and is not indicative of any investment. S&P data © 2024 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.

Figure 3: In USD. Dashes representing returns for a given month are stacked in ascending order of return within each column, with highest return within that range on top. S&P data © 2024 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.