Here’s the average stock market return with Democratic and Republican presidents in the White House

The S&P 500 (^GSPC 0.90%) is one of the three major US financial indices. It measures the performance of 500 large domestic companies covering approximately 80% of domestic stocks by market value. Its scope and diversity make it the best indicator for the US stock market.

In 2024, the S&P 500 advanced more than 20% through the end of the third quarter, its strongest performance so far in the 21st century, according to JPMorgan Chase. That boost was driven by economic resilience and euphoria about artificial intelligence, as well as excitement over the Federal Reserve’s recent interest rate cuts.

However, the next presidential election is just a month away, and many investors are curious about the potential implications. Read on to learn how the S&P 500 fared with Democratic and Republican presidents in the White House.

Average stock market returns under Democratic and Republican presidents

Since its inception in 1957, the S&P 500 has increased 12,950% in value, reaching 7.4% annually. The compound annual growth rate (CAGR) is based on the price return of the index, which means it does not take into account dividend payments distributed along the way. The total return, including dividend payments, would be higher.

The chart below shows the CAGR of the S&P 500 during each presidency since the index was created. It also shows the median CAGR during Democratic and Republican presidents.

Data source: YCharts and White House Historical Association (inauguration data). Above is the compound annual growth rate of the S&P 500 during Democratic and Republican presidencies.

As shown in the chart, the S&P 500 achieved an average CAGR of 10.2% under Republican presidents and 9.4% under Democratic presidents. In this regard, the US stock market has performed slightly better during periods when Republicans have controlled the White House.

However, we can also look at the problem from a different perspective. Specifically, instead of looking at the CAGR over the entire presidency, we can examine the return in each individual year. The chart below shows the return of the S&P 500 in each individual year since March 1957. It also shows the median annual return when Democrats and Republicans held the presidency.

Data source: YCharts. Above is the annual performance of the S&P 500 under Democratic and Republican presidents.

As shown above, the S&P 500 averaged an annual return of 12.9% under Democratic presidents and 9.9% under Republican presidents. In this respect, the US stock market has fared slightly better during periods when Democrats have controlled the White House.

Note that presidents control neither the stock market nor the economy. Their influence is limited to nominations and budget proposals. For example, the president nominates the seven members of the Federal Reserve Board of Governors, but those nominees must be confirmed by lawmakers in the Senate.

In addition, Kamala Harris has proposed raising the corporate tax rate, and Donald Trump has proposed the opposite. Both changes could affect the stock market and the economy. However, Congress has the final say on budget proposals, and lawmakers are not required to approve specific policies.

Furthermore, some events that influence the stock market and the economy are beyond the control of any elected or appointed official. Consider the dot-com bubble, the global financial crisis, and the COVID-19 pandemic. All those events influenced the stock market and the economy and no person could have prevented them.

History says that patient investors will be well rewarded regardless of who wins the presidential election

There are two key takeaways for investors. First, statistics can be manipulated to achieve the desired result. As discussed, the stock market outperformed under Republicans in terms of median CAGR over the entire presidency, but outperformed under Democrats in terms of average returns over individual years. Both statements are true, but they reach opposite conclusions.

Second, avoiding the stock market because one political party controls the White House would be a mistake. After examining earnings from the 1950s, analysts at Goldman Sachs concluded: “Investing in the S&P 500 only during Republican or Democratic presidencies would have resulted in major underperformance relative to investing in the index, regardless of the political party in power.”

Here’s the bottom line: The S&P 500 has returned a total of 2,090% over the past 30 years, which equates to an annual return of 10.8%. That period spans such a wide range of economic and market conditions that investors can expect similar returns over the next three decades. In this context, the US stock market is a smart place to invest money, regardless of which party wins the presidential election in November.