Historical Performance of the S&P 500
The S&P 500 is widely regarded as a key benchmark for the overall U.S. stock market, tracking the performance of 500 large companies that account for approximately 80% of domestic equity market capitalization. A closer examination of historical data reveals trends in the index’s performance under different presidential administrations.
Republican Presidents and the S&P 500
The following table summarizes the Compound Annual Growth Rate (CAGR) of the S&P 500 during the terms of Republican presidents since the index’s inception in 1957:
| Republican President | Years in Office | S&P 500 CAGR |
|---|---|---|
| Dwight D. Eisenhower | 1957-1961 | 7.8% |
| Richard Nixon | 1969-1974 | (4.1%) |
| Gerald Ford | 1974-1977 | 10.4% |
| Ronald Reagan | 1981-1989 | 10.2% |
| George H.W. Bush | 1989-1993 | 10.9% |
| George W. Bush | 2001-2009 | (6.2%) |
| Donald Trump | 2017-2021 | 14.1% |
| Average | N/A | 6.2% |
| Median | N/A | 10.2% |
The average CAGR for the S&P 500 during Republican presidencies is approximately 6.2%, with a median return of 10.2%.
Democratic Presidents and the S&P 500
In contrast, here’s how the S&P 500 has fared under Democratic presidents:
| Democratic President | Years in Office | S&P 500 Annual Return |
|---|---|---|
| John F. Kennedy | 1961-1963 | 5.4% |
| Lyndon B. Johnson | 1963-1969 | 7.6% |
| Jimmy Carter | 1977-1981 | 6.3% |
| Bill Clinton | 1993-2001 | 15.2% |
| Barack Obama | 2009-2017 | 13.8% |
| Joe Biden | 2021-present | 11.5% |
| Average | N/A | 9.9% |
| Median | N/A | 9.3% |
Under Democratic presidents, the S&P 500 has recorded an average annual return of 9.9% and a median return of 9.3%.
Evaluating the Data
When comparing the historical data, it’s evident that the S&P 500 has yielded better returns on average under Democratic leadership. However, the median figures suggest a closer contest, indicating that specific terms of Republican presidents have also achieved significant market gains. This data means both parties can legitimately claim periods of stock market strength during their administrations.
Market Performance Beyond Politics
A crucial takeaway from Goldman Sachs’ analysis earlier this year emphasizes that stock prices are primarily driven by macroeconomic fundamentals, regardless of which party occupies the White House. Investment outcomes are often more influenced by the timing and conditions of the market than by the political affiliation of the president.
To illustrate the impact of long-term investment strategies, consider a hypothetical investment of $10,000 in the S&P 500 index fund since its inception in 1957:
- Investing solely during Republican presidencies would yield approximately $67,000.
- Investing solely during Democratic presidencies would amount to around $260,000.
- Conversely, investing across both presidential terms would culminate in a staggering $1.7 million.
This demonstrates the importance of a diversified investment strategy over time, rather than attempting to time the market based on political cycles.
Caution in Political Investing
Investors are advised to exercise caution when correlating presidential candidates with stock market predictions. Terms like “Trump trade” or “Harris trade” often arise, but history shows that relying solely on which party wins the presidency can lead to mixed results. For instance, many anticipated struggles for tech stocks during President Biden’s tenure, yet the tech sector has thrived, disproving pre-election predictions.
