As we head in an election cycle, most investors tend to let the political rhetoric shape their views on the markets. And it’s no wonder: the airwaves will be filled with mudslinging reports about each party’s opposition candidate for the next 80 days (84 as of writing this).
So as financial advisors it is our job to remind clients that “time in the market” is more important than the political party of the U.S. president when it comes to investment returns.
Let’s look at two scenarios.
Last 10 Years (2013-2023)
If you had invested $100,000 on December 31, 2013:
– If you only invested during Democratic presidencies: The investment would grow to $172,000.
– If you only invested during Republican presidencies: The investment would grow to $181,000.
– If invested continuously regardless of the political party: The investment would grow to $311,000.
Last 70 Years (1953-2023)
If you had invested $1,000 on December 31, 1953:
– If you only invested during Democratic presidencies: The investment would grow to $50,000.
– If you only invested during Republican presidencies: The investment would grow to $31,000.
– If invested continuously regardless of the political party: The investment would grow to $1.58 million.
The message is clear: staying invested over the long term, without concern for which political party is in power, yields significantly better returns.
Morningstar as of 12/31/23. Stock market represented by the S&P 500 Index from 1/1/70 to 12/31/23 and IA SBBI U.S. large cap stocks index from 1/1/54 to 1/1/70. Past performance does not guarantee or indicate future results. Index performance is for illustrative purposes only. You cannot invest directly in the index.
