While there will be many storylines for investors throughout the upcoming year, one of the largest will likely be the 2024 presidential election.
Here's what history shows about investing in presidential election years.
What Happened: President Joe Biden recently highlighted the all-time highs for the stock market in a campaign video, which drew the attention of voters and former President Donald Trump.
While stock market indexes are closing 2023 near all-time highs, it comes with high inflation and after 2022 had one of its worst years for stocks in decades.
The S&P 500 gained 37.4% during Biden's first year in office, which was the best one-year market return under a president since Harry Truman in 1945.
In 2022, the S&P 500 experienced a decline of over 19%, representing the largest annual drop since 2009.
The SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500 Index, is up 23.7% since Biden assumed the presidency. The return over the past nearly two years would represent an average yearly gain of around 11.9%.
During Trump's four years as president, the S&P 500 had average annual gains of 14.5%. The SPDR S&P 500 ETF Trust was up around 67% during Trump's four years in office, making it one of the best four-year returns for the stock market in recent history.
While Trump and Biden's time as president have both been during times of outperformance from the stock market, history shows that presidential election years often outperform the overall market average.
Related Link: Trump Now Beating Biden In All 7 Swing States Says One Poll: Here’s The Lead, Why Current President Should Be Concerned
S&P 500 Returns: One of the largest stock market indicators for investors continues to be the S&P 500, which tracks the performance of 500 of the largest U.S. companies.
Over the last 16 presidential election years, the S&P 500 has been up 14 of the full years, according to Barchart. The lone two presidential election years in the last 60-plus years that saw the S&P 500 down were the global financial crisis and the dot-com bubble.
1960: +0.5%, Kennedy (D) elected
1964: +16.5%, Johnson (D) elected
1968: +11.1%, Nixon (R) elected
1972: +19.0%, Nixon (R) elected
1976: +23.8%, Carter (D) elected
1980: +32.4%, Reagan (R) elected
1984: +6.3%, Reagan (R) elected
1988: +16.8%, Bush H.W. (R) elected
1992: +7.7%, Clinton (D) elected
1996: +23.1%, Clinton (D) elected
2000: -9.1%, Bush W. (R) elected
2004: +10.9%, Bush W. (R) elected
2008: -37.0%, Obama (D) elected
2012: +16.0%, Obama (D) elected
2016: +12.0%, Trump (R) elected
2020: +18.4%, Biden (D) elected
The average return of the S&P 500 in the presidential election years shown above is 10.5%. Stripping out the global financial crisis and the dot-com bubble, the S&P 500 gained an average of 15.3%.
The S&P 500 has averaged annual gains of 10.1% from 1957 through 2022, which means presidential election years outperform the normal annual gains.
Dow Jones Industrial Average Returns: While the S&P 500 had years of outperformance in presidential election years, the Dow Jones Industrial Average has been more of a mixed bag.
Investors can get exposure to the index, which tracks 30 blue-chip U.S. stocks and is price-weighted, with various ETFs including the SPDR Dow Jones Industrial Average ETF Trust DIA.
Here are the annual returns for the Dow Jones Industrial Average in presidential election years:
1960: -9.3%
1964: +14.6%
1968: +4.3%
1972: +14.6%
1976: +17.9%
1980: +14.9%
1984: -3.7%
1988: +11.9%
1992: +4.2%
1996: +26.0%
2000: -6.2%
2004: +3.2%
2008: -33.8%
2012: +7.3%
2016: +13.4%
2020: +7.3%
The Dow Jones Industrial Average had four of the last 16 presidential election years have a negative return. The average return of the Dow Jones Industrial Average is +5.4% over the past 16 presidential election years.
Nasdaq 100 Returns: The Nasdaq 100 was created in 1985 and includes 100 of the largest non-financial companies listed on the Nasdaq stock exchange. The index is often tracked with ETFs like the Invesco QQQ Trust Series 1 QQQ and is heavily weighted towards the technology sector.
With a smaller sample size, the returns for the Nasdaq 100 in presidential election years are:
1988: +13.5%
1992: +8.9%
1996: +42.5%
2000: -36.8%
2004: +10.4%
2008: -41.9%
2012: +16.8%
2016: +5.9%
2020: +47.6%
The Nasdaq 100 was down in two of the nine presidential election years since the index was created. The average return of the Nasdaq 100 in presidential election years is 7.4%.
Why It's Important: The economy remains a key issue for voters ahead of the 2024 election. A recent Morning Consult found the economy the top-rated issue from voters at 73% of nationally registered voters polled.
The stock market's performance during previous presidencies has been a hot topic between Biden and Trump.
Data showed that presidential election years outperform regardless of who was elected. Based on the data above, the S&P 500 could lead the way in 2024, followed by the Nasdaq 100 and Dow Jones Industrial Average.
Photo: Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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