By Philip Ambrose

Understanding stock market behavior after an election and inauguration helps inform strategic financial decisions. Here, we explore market trends and how they differ when a Democrat or Republican takes office.

Market Performance Post-Election

In the first year after an election, markets typically rise regardless of the outcome. For example, following the 2020 election of President Joe Biden, the S&P 500 rose by approximately 27% during his first year in office. This growth was fueled by strong recovery efforts following the pandemic and substantial government spending on infrastructure and relief programs. Similarly, after the 2016 election of President Donald Trump, the market experienced a notable surge, with the S&P 500 gaining around 19% during his first year, driven by tax reform expectations and deregulation.

Democrat vs. Republican Administrations

When a Democrat is elected, initial market reactions can be mixed due to concerns over potential corporate tax increases or enhanced regulation. However, historical data reflects that Democratic presidencies often yield strong long-term market growth. For instance, during President Barack Obama’s two terms (2009–2017), the S&P 500 nearly tripled in value, driven by economic recovery from the Great Recession and consistent job growth.

Conversely, Republican administrations often spark more immediate market optimism based on expectations of business-friendly policies. President Ronald Reagan’s presidency (1981–1989) saw significant market growth, with an average annual S&P 500 return of 14.2%, fueled by tax cuts and a strong economic recovery. President Trump’s administration similarly enjoyed initial market gains, with tax cuts and deregulation propelling investor confidence.

Conclusion

Although the initial reactions differ between party victories, markets typically stabilize over time, focusing more on economic fundamentals. At Rosenberg Alvis Ambrose Wealth Management, we leverage this historical insight to guide our clients through cycles, tailoring strategies that anticipate both short-term fluctuations and long-term growth.

Understanding these patterns equips investors to position themselves strategically, regardless of the political landscape.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2023 FMG Suite.

This article was provided by Philip J Ambrose, CFP®

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