It’s natural for investors to look for a connection between who wins the White House and which way stocks will go, says Dimensional Fund Advisors. Let’s explore history with the charts below:
Over 100 or so years of stock returns in the US shows us an upward trend regardless of the President or political party in power. Investors buy shares of companies based on their expectations of future profits. While politics can have some effect on market returns, many other factors-worldwide geopolitical events, interest rates, energy prices and technological advances, to name a few, also have impacts.
Looking at short-term results, the chart below shows that the month of an election has no consistent pattern of returns, regardless of the party who wins. The history of market behavior during election months makes a strong case for making a plan and following it to help achieve your long-term financial goals.
To summarize, stocks have rewarded disciplined investors for decades, through both Democratic and Republican presidencies.