By Philip Bachman
Our office was studying an interesting long-term chart of a well-established mutual fund yesterday. The fund invests primarily in the U.S. stock market, so the chart looks similar to the S&P 500. This particular chart shows the fund’s performance from 1934 through 2014. Since 2016 is an election year, this chart is timely because it has overlaid notations about the U.S. presidents in office since 1936.
There have been 11 terms of Democratic presidential leadership and nine terms of Republican leadership in the White House since 1936. Interestingly, the difference between the fund’s investment performance results (based on 10-year periods, each beginning on January 1 of a new presidential term year) of Democrat and Republican presidents is negligible. The fund had average annual returns of 11.0% during the Democratic 10-year periods and 10.7% during the Republican 10-year periods.
The fund’s performance figures span periods of both general economic calm and strain and overlap different presidents. There are several other studies presenting data about the stock market’s performance in presidential election years and among presidential cycles. However, each cycle has been unique, making it difficult to predict the next one with certainty.
What we see validates being invested in the market regardless of political cycles. We observe that long-term investment returns, at least as calculated using this fund’s metric, have little correlation to the political party of the White House. In other words, for long-term investors, one could invest into the market with either a Democrat or Republican in office and do well over time. Given the current uncertainty in the market and in the election, that is a good reminder for all of us right now.
