Chart of the Day: Midterm Elections
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Contents
Today's Chart of the Day uses data from The White House Historical Association, YCharts, and Morningstar to explore how U.S. stock markets have performed across presidential administrations, political parties, and various stages of the election cycle. With midterm elections approaching, many investors are wondering what history can tell us about the relationship between elections and market performance.
While markets often experience increased volatility leading up to elections due to uncertainty around potential policy changes, historical data shows that stocks have generally moved higher over the long term regardless of which political party holds the presidency. Since 1926, a hypothetical $1,000 investment in U.S. stocks has grown substantially through both Democratic and Republican administrations.
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The election cycle data also highlights that market returns have varied across presidential terms, with the strongest average returns historically occurring during the third year of a presidential cycle, while election and midterm years have sometimes experienced greater uncertainty and wider ranges of outcomes.
Looking at individual presidencies, market performance has differed significantly from one administration to another, reinforcing that investment returns are influenced by a variety of factors beyond politics alone. Corporate earnings, interest rates, inflation, economic growth, and broader market conditions have historically played a much larger role in shaping long-term outcomes than election results.
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These charts provide historical examples of how markets have reacted during different political environments and election cycles. While elections can create short-term volatility, the long-term trend demonstrates the importance of maintaining a disciplined investment strategy focused on economic fundamentals rather than political headlines.
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