Do Election Results Predict Equity Market Performance?

February 24, 2016

During election seasons we are frequently asked about what will happen to the market if a particular candidate or party wins, or whether certain years of the presidential cycle are better for investors. While there are numerous opinions about how differing public policies can affect the economy and financial markets — which goes well beyond the scope of this Chart of the Week — we can observe some trends from history. Since 1926, the first year of a presidential term on average is the weakest, while the third year generally performs well. The election year itself tends to be fairly average. Additionally, the market has generally performed better while a Democrat was sitting president, with an average return of 15% compared to 8.6% for Republican presidents.

While these trends seem interesting, it would be imprudent to make any market predictions based on this data. The historical data is extremely limited and undoubtedly a case of random patterns in a small data set rather than a legitimate correlation. For instance, an investor who only invested in the stock market when the NFC won the super bowl would significantly outperform one that invested when the AFC won (14.6% compared to 8.2%). Similar results can also be seen when investing in only odd years, or years that end with a certain digit (3, 5, etc). In order to be statistically significant, one would need over 2,000 election year data points to achieve a meaningful significance level. While there may or may not be particular reasons behind these realized returns patterns, from a statistical standpoint it would be unwise to base any investment decisions off of them.

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Related Content


The “Fix” Is In!

The strength of the U.S. economy over the last several quarters has surprised many investors, as consensus expectations from the…


The Emergence of Argentinian Equities

Argentina has faced myriad economic headwinds in recent time, including hyperinflation, currency-related difficulties, and a series of defaults on its…


Is Bitcoin Fairly Valued?

Despite mixed performance to start 2024, bitcoin finished the first quarter up roughly 68%. Buoyed by a broad weakening of…


1Q 2024 Market Insights Video

This video is a recording of a live webinar held April 25 by Marquette’s research team analyzing the…


Mind the Gap

Any ride on the London Tube reminds riders to mind the gap: Beware the space between train car and platform…


Japan: This Year’s Vacation Recommendation

Foreign investment isn’t the only thing streaming into Japan. In 2023, the number of travelers to the country surpassed long-term…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >