How do Stocks Perform During Election Years?

Mainstream media would have you believe election years are terrible for markets. It doesn’t help that candidates usually promise the stock market will crash if they don’t win. However, history has proven them wrong time and again;

Since 1937, the average return for the S&P 500 during election years has been a healthy 9.9%. This is right in line with long-term averages. Moreover, only three of the past 21 election years have seen losses: 1940 (World War II), 2000 (Dot-Com bust), and 2008 (Great Financial Crisis).

That doesn’t mean the market doesn’t still get the jitters. We looked at the stock market volatility prior to elections; you can see the 6 month periods prior to election day in red:

However, the stock market ultimately focuses on a single bottom line: future earnings. It certainly could experience higher volatility during the political circus, but both Trump and Biden would be second-term presidents. That’s important because their economic policies (which are a focus for businesses) are fairly predictable.