Dear Valued Clients and Friends: Every four years we field questions about the possible effect of a presidential election on stock returns. This is understandable as presidential elections tend to bring out uncertainties that fuel discussions and this year’s election holds far more uncertainty than the norm. So, with the election a few short weeks away, we thought it would be interesting to look at the historical relationship between the stock market and presidential elections.
But it is well worth noting at the start, while it may be interesting (even fun) to discuss whether one party or the other is better for the stock market, the reality is that stock market expectations of election outcomes are embedded in security prices. Other factors such as globalization and technology, the fed and the economy are far more important in the long run than election outcomes.