Politics has been a focus for markets in 2024, with about 60% of the global population voting in elections in at least 76 countries. Of course, the big one is still to come. The US presidential election, scheduled for 5 November, is dominating headlines, prompting questions from investors in Australia and New Zealand about how they should respond.
It’s natural for investors to look for a connection between who wins a country’s election and which way stocks will go. But the outcome of an election, even in a major economy and superpower like the US, is still only one of many inputs that can impact stocks.
Shareholders are investing in companies, not a political party. And companies focus on serving their customers and helping their businesses grow, regardless of who is in government. This means that making investment decisions based on possible election outcomes is unlikely to result in reliable excess returns.
To illustrate this point, look at the chart below. It shows the annualised performance of the S&P 500 under a succession of US Presidents, both Republican and Democrat, going back to Herbert Hoover in 1929.
It’s difficult to see any pattern here. Markets have generally delivered positive returns regardless of who was in the White House. And that reinforces the point that using different election scenarios to steer your investment portfolio is unlikely to be a winning strategy.
27 October 2024
By Warwick Schneller, PhD, CFA
Senior Investment Strategist and Vice President
Dimensional Fund Advisers
Disclaimer: Past performance is no guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Each president’s annualised return starts with the first month of presidency and ends with the last full months of returns of presidency. Source: S&P data 2024 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.
