Quarterly Commentary

What impact will the next presidential administration have on the stock market?

While predicting the future is impossible, history does provide some valuable insights, and it can be fun to take a look back. The first contested U.S. presidential election took place on November 4, 1796. After serving two terms, George Washington declined a third, and by this point, a two-party political system had formed. The Federalists were represented by John Adams, and the Democratic-Republican Party by Thomas Jefferson. Despite once working together to unite the North and South as well as shape the nation’s founding documents, their campaigns took a nasty turn. Accusations flew, ranging from nepotism and imperialism to encouraging foreign interference and cheating. The media was filled with hit pieces, and personal attacks on character and even physical appearance were common.

Adams went on to win, but four years later, Jefferson claimed the presidency after another bitter election. Alexander Hamilton played a key role in swaying the outcome when a tie occurred between Jefferson and Aaron Burr (Adams came in third). When Burr later lost his bid for New York governor — again due to Hamilton's influence — he challenged Hamilton to a duel. On July 11, 1804, Burr shot Hamilton on the dueling grounds of Weehawken, New Jersey, and Hamilton succumbed to his wounds the following day.

But enough with the history lesson; let’s get back to our original question. First, it’s worth noting that political campaigns in the U.S. have long been contentious. Winston Churchill once quipped, "Democracy is the worst form of government, except for all the others."

To help answer the question, we’ve included a slide from our friends at Dimensional Fund Advisors. It highlights the influence of various administrations on markets over the past 100 years or so. Interestingly, stocks have generally trended higher regardless of which party controls the White House, House of Representatives, or Senate. There really is no correlation between Republican or Democratic Administrations on market returns. Too many other factors influence a company’s success over time — factors that often fall outside the control of the President or Congress.

Historically, a diversified portfolio of stocks has delivered an average annual return of around 10%. However, about one in four years — roughly 25% of the time — the market experiences a downturn. That said, the remaining three out of four years tend to be positive.

Although today’s rhetoric in the media and political realm may seem especially harsh, it’s not all that different from what we've seen over the past two centuries. Whether you walk into a corner café, or a cornfield in the 18th century, you’d mostly find friendly, good-natured people going about their daily lives.

As our country has weathered everything from duels and civil wars to the rise of the internet and artificial intelligence, the long-term trend of rising markets has held. Even with our long history of contentiousness and strife in the United States, including the current chaos around the world, we continue to believe optimism is the only realism.

Please do not hesitate to contact us with any questions you may have.

Fort Vancouver Investment Management, LLC