Does Politics Really Matter for Your Stock Portfolio? The Data Says No

Question

Every election season, investors hear the same argument: one political party is better for stocks than the other. But what does the actual data show?

Since the S&P 500’s launch in 1957, here’s what happens when you sort returns by who’s in the White House:

If you look at CAGR (compound annual growth rate): Republican presidencies averaged 10.2%, while Democratic presidencies averaged 9.3%. Republicans win.

But flip the metric—median annual returns: Democratic years posted 12.9%, Republican years only 9.9%. Democrats win.

So which party is better for stocks? The answer: it depends on how you shuffle the numbers.

Why This Debate Misses the Point

Here’s the thing—picking stocks based on the presidential party is objectively a losing strategy. Goldman Sachs actually tested this: investors who only bought S&P 500 during Republican years (or only Democratic years) dramatically underperformed those who just… stayed invested regardless of politics.

Why? Because macroeconomic fundamentals move markets, not political parties. Yes, policy matters at the margins. But no single president controls inflation, supply chains, tech cycles, or global crises.

Think about it:

The dot-com crash? Nobody “caused” that with a policy
2008 financial crisis? Years of systemic lending issues, not one administration
Covid crash? A global pandemic, not a political choice

All happened under different parties. All destroyed portfolios regardless of who was campaigning.

What Actually Works

Over the past 30 years, the S&P 500 returned roughly 10.8% annually (including dividends). That spans multiple recessions, booms, and regime changes—both parties included.

The boring truth: patient investors got rich. Not because of who won elections, but because they didn’t try to time politics.

The takeaway? When a candidate claims their party is better for markets, they’re usually just cherry-picking data to fit their narrative. Your job as an investor is simpler: ignore the noise, stay diversified, and let compound returns do the work.