Investment Returns and Presidential Elections

By October 3, 2016Uncategorized

2016-ElectionOne month away from the general election, everyone is talking about how the next President will affect the stock market. Opinions vary based upon political leanings, but most believe there is a connection.

I recently reviewed some research from Dimensional Fund Advisors in a short Youtube presentation. You can watch the 5 minute recording and view the information by clicking here

The data suggests there is little to no correlation between presidential elections and investment return. If any correlation exists, it is a positive correlation. According to the Dimensional study going back to 1928, the S&P 500 has returned on average 11.2% in an election year, and 9.3% in the year after an election. The analysis also compared election cycles to international, emerging, and bond market indexes with similar results.

Based upon the evidence, we can all stop worrying about how the election will influence our investments. Our political system is not perfect, but it has provided for peaceful transition and continuity of presidential power. The result has been unprecedented economic stability. Citizens of other countries around the World, like Venezuela, are not as fortunate.