Some investors speculate that the direction of the stock market will depend heavily on the outcome of next week’s election. But at the end of the day, does it really matter who wins?

Conventional wisdom has always thought that the Democrats are generally bad for the economy and the stock market because of their big government tendencies, while the fiscally conservative Republicans are generally considered to be good. However, if you look at how the stock market preformed under the two different parties, back to the end of World War II, you will see that this widely accepted belief is actually not true. From 1952 to June 2020, the annualized real stock market returns under the Democrats was 10.6% compared to the Republicans at 4.8%.

With the U.S. election less than a week away, many investors are weighing the pros and cons of a Biden vs. Trump presidency. A Democratic win will almost certainly mean a roll back of Trump’s corporate tax cuts (a negative for stocks), but a robust economic stimulus package (which the market would love) along with a more stable U.S.-China trade relationship. A Republican win usually means lower taxes and an easing of business regulation (which Trump delivered early in his first term-and would be positive for the markets). Some additional economic stimulus is likely; however, Trump is expected to remain firm on his tariff and trade polices, which could be a negative for the global economy.

According to Jeremy Siegel, author of the 1994 investment book Stocks For The Long Run, Wall Street’s fixation with politics is largely misguided: “Bull markets and bear markets come and go, and it’s more to do with business cycles than presidents.” In some ways the current economic/political environment has similarities to the threats that faced George W. Bush post 2001 (replace terrorism with pandemic), the civil unrest that hounded both the Johnson and Nixon administrations, and Ronald Reagan’s trade war with Japan in the 1980s.

As seen in the chart below, the president who had the best cumulative stock market return during his tenure was William J. Clinton, up nearly 210%. The worst was George W. Bush, with -40%. The biggest cause of market volatility by far, regardless of who sits in the white house, has always been uncertainty. For example, in 1955, the stock market plummeted 6.5% in one day when Eisenhower suffered a sudden heart attack after playing a round of golf. When President Kennedy was assassinated in November 1963 the markets immediately fell 3%. It should be noted in both cases the markets promptly recovered.

Market volatility and politics aside, take comfort in the fact that over the long run, buy and hold has always worked best for investors. A $1000 invested in an index of large U.S. stocks in January 1945, would have compounded at an annual rate of return of 11%, the investment would have been worth $2.3 million by the end of 2019.

Have a great Halloween weekend!

Tracey

Source: Forbes.com original article written by Sergei Klebnikou and Halah Touryalai, Forbes Staff, Fidelity Investments

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