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Midterm Elections - Does the Stock Market have a Preference?

One of my favorite assignments on active duty was flying C-21As (Learjet 35As) at Andrews AFB. I joke that I had so much fun in that job; I would have gladly done it without pay. While living in the Washington D.C. area, it was hard not to pay attention to politics. In fact, the President would often show up for service at the church I attended downtown. With the midterm elections coming in 2022, I think it's natural to wonder how much control any particular party wields on the stock market's valuation.

A recent study examined the stock market's performance during times when each of our political parties controlled the White House. The findings are presented in the graph below and might surprise you.

While it’s natural for investors to look for a connection between who wins the White House and which way stocks will go, nearly a century of returns shows stocks have trended upward across administrations from both parties.

• Shareholders are investing in companies, not a political party. And companies 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 hundreds, if not thousands, of other factors—the actions of foreign leaders, a global pandemic, interest rate changes, rising and falling oil prices, and technological advances, just to name a few.

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

It’s an important lesson on the benefits of a long-term investment approach.

For a free risk tolerance assessment, click on the link below to see my Riskalyze explanation video and find your personal risk number.

I'm happy to talk about your risk tolerance and the risk of your investments on a complimentary call. As a fee-only fiduciary advisor, I never receive commissions and therefore am unbiased on this topic.

Disclaimer: Any indices referenced for comparison are unmanaged and cannot be invested into directly. Investments in securities involve the risk of loss. Nothing in this blog should be considered financial advice or recommendations. Your questions are unique to you and your own personal financial circumstances. You should consult with a financial professional before making a financial decision. See full blog disclaimer.

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