3rd Qtr 2016: Presidential Elections and Market Returns

Despite all the negative news constantly streaming on our TV screens, the equity and fixed income markets continue to perform very well thus far in 2016. In fact, this year we have seen many equity asset classes bounce back from a lackluster 2015. US value stocks, US small stocks, emerging markets and the energy sector are handily outperforming the S&P 500 in 2016. Yet another lesson in why investing requires discipline and a long term, evidence based strategy and not predictions or forecasts involving short term market movements.

Now that we are only a month away from the elections, many people are wondering how this event might affect their investments. Investors often get caught thinking that if their candidate wins the market will do much better and if the other candidate wins the market will immediately fall sharply. The problem is that both sides of the political isle think the same thing!

So who is right? Maybe surprising to some, the answer is neither. While the US Presidential election is certainly a major world event, it is but one of thousands of variables that can affect the stock market. The chart below shows the average annual returns for every president since 1929.

Presidents vs. Markets and Inflation

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