Elections Pass, Stocks March On

Investors spent most of 2024 shrugging off macro geopolitical fears — energy, climate change, conflicts in Ukraine and the Middle East — that could potentially have disrupted market returns. Instead, the narratives driving the markets have been much more focused on AI, resilient growth, and lower interest rates, with seemingly little worry about who sits in the White House.

As of market close on Election Day, the S&P 500 was up 21.93% and the Nasdaq up 24.88% for the year, far better than the nearly 5% year-to-date performance of the average presidential election year going back to 1950. In fact, 2024 has been the best 10-month run for U.S. stocks of any election year since 1936.

But political concerns inevitably seemed more pressing as the fiercely contested presidential race resulted in a projected victory for Republican nominee Donald Trump.

Here’s the real truth: For investing, it doesn’t matter much.

Through COVID-19, Brexit, the Great Recession, 9/11, Black Monday, record inflation, Watergate, Vietnam, and dozens of U.S. presidents…

Stocks have, eventually, moved up and to the right. Over time, the real winner is the long-term investor.

I find the visual of long-term investing returns reassuring during stressful times in the market. Check out this one covering the past 50-plus years (the gray bars indicate recessions):

^SPX data by YCharts

Basically, over the past five decades, investing — no matter the starting point — has paid off. Maybe not always over one year. Or two. Maybe three. But over five and 10 years and longer, being a buyer and holder of U.S. stocks has worked out very well.

And despite the angst, the market’s returns haven’t seemed to care who sat in the Oval Office. As The Financial Times shared this week, the S&P 500 delivered 10%-plus annualized total returns (the long-term investing average) during every presidential term (except one) since Jimmy Carter.

And during only one period (after George W. Bush’s first election in 2000, during the tech bubble collapse) did stocks end up lower 12 months after an election.

What smart investors can do now

This doesn’t mean we won’t experience heightened volatility now that we’re done handing in our ballots. There are plenty of business factors that will affect stocks through 2024 and beyond. And for any individual company, a president’s actions can be impactful.

That said, there’s other D.C. news this week: The Federal Reserve announces its latest interest rate policy Thursday. After a 50-basis-point rate cut in September, the Fed is expected to cut its primary lending rate by another 25 basis points. What happens inside the Fed offices on Constitution Avenue is likely to have far more of an effect on investing returns than Donald Trump taking up residence at Pennsylvania Avenue.

So, in this and all interesting times, remember our Motley Fool core investing tenets:

• Be a buyer and holder of businesses, not tickers.
• Invest capital in stocks that you do not need within the next three years.
• Embrace a long-term, patient investing perspective.
• Own at least 25 stocks.
• Hold on average for five-plus years.
• Use ETFs to help you diversify.
• Save and invest, rinse and repeat.
• And most importantly, stay in the game.

The President of the United States is the CEO of the largest, most important, strongest country in the world.

But the truth is that for equity investors like us, who we call our commander in chief is not the most important factor in our investing success. It’s probably not even among the top 25.

So we encourage you to maintain that long-term, Foolish investing mindset that so many of you have already embraced. Separate the signal from the noise. Stay invested. Take advantage of market volatility by looking for buying opportunities.

And if you start to feel anxious or uncertain, just remember the chart above.

Stocks move up and to the right.

Wishing you the best of investing success through all political cycles.

Stay Foolish,
Andy Cross
Chief Investment Officer, The Motley Fool