How do US elections affect the stock market? What history shows

Key takeaways

• US presidential election years have not historically delivered stronger S&P 500 returns on average. From 1972 to 2024, election years produced an average total return of about 11.6%, compared with 12.7% in non-election years.
• Stock market performance has varied sharply from one election year to another, making it difficult to identify a consistent election-year effect.
• Stronger election-year markets have sometimes coincided with the incumbent party retaining the presidency, but the historical relationship does not show that market performance causes election outcomes.
• Average returns in the calendar year after presidential elections also differed depending on which party won, although the small number of elections makes those results difficult to interpret.
• The closer we look at election cycles, the harder it becomes to separate politics from the many other forces influencing markets.

The figures in this article refer to past performance. Past performance is not a reliable indicator of future results. For investors whose home currency is not the US dollar, returns may increase or decrease when converted into their home currency as a result of currency movements.

US elections often prompt the same question from investors: how could the result affect the stock market? It is easy to see why. Elections can change expectations around taxation, trade, regulation and government spending, all of which may affect companies, the economy and financial markets.

That naturally leads to another question: if elections matter, should we be able to see a clear pattern in market history?

To explore how US elections and stock market performance have interacted in the modern era, this guide looks back at 14 US presidential elections from 1972 to 2024. The S&P 500 provides a useful broad measure of the US equity market, allowing us to compare election years, election outcomes and the years that followed.

The results are interesting. But each time a simple pattern seems to appear, the picture becomes more complicated.

Why start in 1972?

Our analysis begins with the 1972 presidential election because it followed a major shift in the global monetary system: the 1971 suspension of US dollar convertibility into gold. The Bretton Woods system was a post-war international monetary arrangement in which many currencies were linked to the US dollar, while the dollar itself was convertible into gold at a fixed price.

In 1971, President Richard Nixon suspended that convertibility, helping bring the arrangement to an end. Starting in 1972 gives us a useful period for examining US elections after that major shift in the post-war monetary system.

Even so, 14 presidential elections is still a small sample. A few unusually strong or weak years can have a meaningful effect on the averages, which is important to keep in mind throughout the analysis.

Do election years really behave differently?

The simplest theory is that presidential election years might behave differently from other years. The historical data does not show that.

Between 1972 and 2024, the 14 presidential election years produced an average S&P 500 total return of approximately 11.6%, compared with approximately 12.7% across the 39 non-election years.

In other words, election years were not stronger on average.

The variation between individual elections is more revealing. The S&P 500 returned around 31.7% in 1980, fell around 36.6% in 2008 during the global financial crisis and gained approximately 24.9% in 2024, based on historical S&P 500 total-return data.

Those outcomes could hardly be more different. If presidential election years created a consistent market effect, we might expect returns to look more similar from one election cycle to another. Instead, markets were dealing with very different economic conditions each time.

Interest rates, inflation, economic growth, corporate earnings, valuations and global events may all have influenced markets alongside the fact that an election was taking place.

But perhaps that is not the most interesting way to look at the relationship.

Can markets offer clues about who wins?

If election years themselves do not show a clear pattern, another possibility is that market performance might tell us something about the political outcome.

There is some logic behind the idea. Strong markets may coincide with a healthy economy and greater confidence, which could potentially help the political party already holding the presidency. The historical numbers do show a difference.

From 1972 to 2024, the average S&P 500 total return during presidential election years was approximately 15.1% when the incumbent party retained the presidency, compared with approximately 9.0% when control changed to the other party.

At first glance, that looks interesting. But there were only six elections in the first group and eight in the second, so individual years have a large influence on both averages.

There is also a more fundamental problem: the relationship does not tell us what caused what. The same economic conditions may influence both markets and voters. Stronger economic growth, for example, may support company profits and share prices while also improving how voters feel about the economy and the government in power.

So the market may not be “predicting” the election at all. Both may simply be responding to the same underlying economic environment.

That makes the pattern worth observing, but not useful as a reliable forecasting tool.

Does the winning party change what happens next?

That leaves another tempting question. If the election result itself matters, should we see a clearer difference once one party or the other has won the presidency?

To test that, we can look at the complete calendar year immediately following each presidential election. Across the 14 elections in the sample, the average S&P 500 total return in the following year was approximately 20.4% after a Democratic victory and approximately 9.5% after a Republican victory.

That is the largest gap in the analysis, and it is exactly the kind of number that can invite a simple political conclusion.

But this is also where caution matters most. The sample includes only six Democratic victories and eight Republican victories, so a handful of unusually strong or weak years can have a substantial effect on the averages.

The wider market environment also changes dramatically from one presidential term to another. Federal Reserve policy, recessions, inflation, interest rates, corporate earnings, valuations and geopolitical events may all influence returns during the year after an election.

So while the difference between the two groups is real within this historical sample, it does not show that markets inherently favour one political party. The data tells us what happened, but not that the winning party caused it.

Why election patterns are hard to turn into a rule

This is where the broader story becomes clearer. At each stage, the data produces something interesting: election years have not outperformed other years on average, stronger election-year markets have sometimes coincided with the incumbent party staying in power, and returns in the following year have differed depending on which party won.

But none of those patterns gives us a dependable election rule. Elections do not take place in isolation, and markets are always responding to a much wider set of forces, including inflation, interest rates, economic growth, corporate earnings, valuations and global developments. Politics can influence some of those forces, especially through taxation, regulation, trade and government spending, but it is only one part of the picture.

The more we try to isolate an “election effect”, the harder it becomes to separate politics from the economic environment surrounding each vote.

What history really tells us about US elections and the stock market

More than 50 years of data gives us plenty to examine, but no simple political formula for market performance.

Presidential election years were not stronger for the S&P 500 on average between 1972 and 2024. Returns were higher on average when the incumbent party retained the presidency, but that does not make the stock market a reliable predictor of election outcomes.

Returns in the year after Democratic victories were also higher on average than after Republican victories, but the small sample and the many other forces affecting markets make it difficult to attribute that difference to politics.

That is the more useful lesson from the history. Elections can matter because they shape expectations around policy and the economy, but historical election-cycle statistics do not give investors a dependable way to predict what the market will do next.

They can provide context, but not certainty.

The analysis covers 14 US presidential elections from 1972 to 2024. Post-election comparisons use the complete calendar year immediately following each election and therefore include market data through 2025. S&P 500 figures are total returns including dividends, expressed in US dollars. The index figures do not reflect investment fees or other charges, which would reduce investor returns if incurred. Averages are calculated using the arithmetic mean and rounded to one decimal place.