The data behind US presidents and markets
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The data behind US presidents and markets

Dec 2022
Nov 2020
The data behind US presidents and markets

Investors adjusted their asset allocation prior to the US presidential election. Are these jitters warranted? Here's what the data shows.

The original version of this article first appeared in The Business Times on 7 Nov 2020, prior to the announcement of Joe Biden as president-elect.

I have been glued to my Google search of "2020 election" all week.

It is not as if the announcement of the winner would silently pass us by, but yet I find myself restlessly checking for updates.

We live in a world where up-to-date data is readily available across all channels at all times. Despite this fact, the US election results, which seemed totally certain earlier this year with polls reading 90% for a Biden win, still feel uncertain days after the 3 Nov election day.

The story around "trading the elections" is a convincing one. Everyone loves talking about the multiple "if - then'' statements on taxes, trade wars, socialism, small and big government, Covid-19, climate change and much more.

UBS did a survey of over 1,000 of their clients with at least US$1 million in investable assets and found that roughly over 35% increased their cash positions and that around 63% made adjustments to their asset allocations.

Looking at prior elections, net fund flows to money market funds surpassed equity funds in the year of an election, while in the year after an election, equity funds had inflows four times greater than those to money market funds (Capital Group, Morningstar 1992 to 2019 data).

But what is the evidence of market returns through different presidencies? And do the jitters pay off?

Short-term investors who took risk off the table before the elections in fear of volatility would have lost out. As of now, without definitively knowing who the next president will be, we have seen the S&P 500 surge by over 7% from 2 Nov to 5 Nov alone.

Zooming out, 19 out of 23 administrations since 1929 have delivered positive investment returns. In this same amount of time, the US went through 15 technical recessions including the Great Depression and Covid-19, alongside global wars, ideological battles, oil crashes, natural disasters, and more.

Investment returns

Let us take a closer look at the stock market returns for the US over the last seven presidents. We rewind to the days of Jimmy Carter. In 1976 the economy was going through stagflation (high inflation and low growth), and the country was in the midst of the Cold War, with an energy crisis on the horizon. His democratic presidency of just four years had a stock market return of 52%.

US elections: Stock market returns per presidential term

Bar charts: total returns per US presidential term, including Donald Trump, Barack Obama, Bill Clinton, Ronald Reagan, Bush
Source: Endowus Research, MSCI, Morningstar, Bloomberg

The average US S&P 500 return of the last seven presidents, including Donald Trump up until 5 Nov 2020, was +122%. The average annualised return of the presidents was +12.2%.

It was not all smooth sailing — you would have had multiple periods of 20% to 50% drawdowns. But if you stayed invested through these past seven presidents, you would have a fantastic total return of over 11,700%.

Only one president, George W. Bush, had a negative return. Unfortunately, he inherited the 2000 dot-com crash and ended his presidency in the depths of the 2008 Global Financial Crisis. His market timing was bad. If you had invested in a global balanced portfolio of 60% stocks and 40% bonds, you would have squeezed out a +14% return for his presidency.

negative returns of George W Bush
Source: Endowus Research, MSCI, Morningstar, Bloomberg

Smart diversification and patience

This election is almost over. We have to remember that the stock market is a time-tested weighing scale that incorporates all known information and perception of the future. It gyrates daily taking into account all of its holders but is very hard to outguess consistently, similar to this election. The polls did a far worse job at predicting this presidential election.

Timing the market is hard and has had a very poor track record for professionals and individual investors alike. In the long run, investors are rewarded for taking compensated risks, and hence the average relationship between cash and bonds and stocks.

The market rewards smart diversification and patience. Investing at a level of risk suitable for your money goals relieves you of the stresses of short-term uncertainty, and increases your probability of success. You can have many structured investment portfolios with different levels of risk depending on when you want to use the money.

If I am investing my CPF and SRS for retirement, for example, I know that this money is for my lifestyle from the age of 65 to 100, and therefore I can afford to take on more volatility and buy more equity exposure to get a higher expected return. To succeed I know that I must be patient. Presidents, crises and ideologies will come and go, but the power of humans and markets will remain.

Go deeper with the Endowus Investment Office by watching their webinar on how the US election impacts the financial markets.

Explore our Fin.Lit Academy to pick up tips on investing, wealth building, personal finance, CPF and SRS, and retirement planning. To get started with Endowus, click here.


Investment involves risk. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Past performance is not an indicator nor a guarantee of future performance. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund. 

Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Pte. Ltd (“Endowus”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Endowus Pte. Ltd., its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider (i) whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or the Endowus platform and independent legal, accounting, regulatory or tax advice, as appropriate.

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