With Election Day now behind us, many of us are likely breathing a sigh of relief as the tumultuous campaign season comes to a close. However, with several months still remaining before the inauguration, you might be wondering how this period of political transition in Washington will impact your assets. According to an article I recently read, the shift of power in Washington has had little discernible effect on equity market performance historically.
From 1933 to 2023, whether under unified or divided governments, the average annual return for the S&P 500 Index has consistently ranged from about 11% to 14%. In fact, a split Congress, such as the one we have today, has historically produced an average return of 13.7%. More recently, markets have performed even better in the year following Election Day, with a remarkable 40.4% gain after the 2020 election. On the other hand, the worst period came after the 2000 election, when the index fell by 21.0%. Since 1984, the average annual return has been 17.6%.
As Matt Miller, a Capital Group political economist and former senior advisor to the White House Office of Management and Budget, puts it: “At the end of the day, financial markets appear to care more about the certainty of election outcomes than about who occupies the White House or who controls Congress.” While it’s impossible to predict exactly how the coming months will unfold, investors should be prepared for some short-term volatility and keep a long-term perspective as they navigate this transitional period.
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Read the entire article HERE