Could another 4 years of a Biden Presidency make the stock market go down? What if Donald Trump reclaims the presidency? We took a look back over the last 40+ years to see if any conclusions could be drawn from the past.
Ronald Reagan: 1981-1989 (Republican)
40 years ago, America elected Ronald Reagan to be the President. Many were concerned that this former actor lacked the experience needed.
Some were afraid he would cause a nuclear war with the Soviet Union, or that Reaganomics would trigger a depression. The stock market proved less fearful, posting a 14.2% average annual return throughout his 8-year presidency.
George Herbert Walker Bush: 1989-1993 (Republican)
George H.W. Bush succeeded Reagan having gained experience for the job while serving as Reagan’s V.P. Some Americans may have worried that he wouldn’t have the same leadership to keep the economy rolling, however, the S&P 500 continued performing posting a 15.7% average annual return throughout his 4-year term.
Bill Clinton: 1993-2001 (Democrat)
With the Democrats seizing power from the 1992 election, some thought that higher taxes and increased regulation would doom the stock market. Amazingly, stocks kept moving higher, posting a whopping 17.2% average annual return throughout his 8-year presidency. History would prove that a Democratic President did not cool the stock market as stocks overheated and even bubbled up towards the end of Clinton’s second term.
George Walker Bush: 2001-2009 (Republican)
The economy went into recession shortly after George W. Bush was signed into office. This was triggered by the dot com bubble bursting and rising interest rates. While the economy and stock market recovered through most of the rest of his presidency, the stock market crashed towards the end of his 2nd term as a deep recession rocked markets around the world. The great financial crisis caused the S&P 500 to decline 37% during Bush’s final year and while he left office with stocks at a very low point, his presidency saw a negative (2.9%) annual return of the S&P 500 while he was in office.
Barack Obama: 2009-2017 (Democrat)
Barack Obama was another President who was elected and some viewed him as being inexperienced. While stocks were at a low point when he was signed into office, the economy recovered, and investors saw a 14.5% annual return on the S&P 500 through his two-term presidency. Once again stocks performed well despite modest tax increases and regulation.
Donald Trump: 2017- Present (Republican)
In 2016, clients often asked if the market would plunge if Donald Trump won the presidency. Dow Futures actually did plunge overnight upon his victory, however, the next day stocks rallied back with the Dow closing 256 points higher. Things continued rallying through the end of 2016 and the S&P 500 rose over 21% the following year. While the Coronavirus saw stocks plummet 33% in March of 2020, overall stocks advanced 13.7% annually throughout Donald Trump’s 4-year term.
Joe Biden: 2020- Present (Democrat)
Stocks continued advancing after Joe Biden took office with stocks rising almost 27% in 2021. While 2022 was a rough year for stocks (-18%), they rebounded the following year, and in 2024 stocks have reached new all-time highs shrugging off inflation and fears of a recession that never came (yet at least).
Conclusion
When looking at past administrations and how the markets performed, a clear conclusion as to which party the market prefers cannot be drawn. The one thing that we can conclude is that markets tend to go up over time no matter which party is in office. Looking at past returns through different administrations has allowed us to see that since 1980 the stock market has earned an average annual rate of return of just over 10%. There have been many Presidents, wars, and even pandemics that have come and gone but having an investment in the market over a long period has proven successful through simply buying and holding. As always, time in the market as opposed to timing in the market is where wealth accumulation is achieved.
Respectfully submitted by:
CRA Investment Committee
Matt Reynolds CPA, CFP® Tom Reynolds, CPA
Robert T. Martin, CFA, CFP® Gordon Shearer Jr., CFP®
Jeff Hilliard, CFP®, CRPC® Joseph McCaffrey, CFP®
Phillip Tompkins, CFP®
(This article is for informational and educational purposes only and should not be relied upon as the basis for an investment decision. Consult your financial adviser, as well as your tax and/or legal advisers, regarding your personal circumstances before making investment decisions.)
CRA Financial, crafinancial.com, 609-380-3500, 332 Tilton Road, Northfield, NJ
