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Sound Advice: August 27, 2025

Market returns vary considerably over presidential terms 

Market Returns Across U.S. Presidential Terms

Stock market returns show significant variation across different presidential terms.  Although the president’s policies may influence short-term market direction and sector performance, a wide range of factors—especially economic trends, monetary policy, and global events—drive overall market outcomes.  Nevertheless, notable patterns and differences have emerged in market performance during and around presidential terms.

Average Stock Market Returns by Presidential Term

President

Years in Office

Avg. Annual S&P 500 Return

Barack Obama

2009–2017

12.8%

Donald Trump (1st term)

2017–2021

13.6%

Joe Biden

2021–2025

11.9%

Donald Trump (2nd term)*

2025–present

4.6% (early tenure)

Bill Clinton

1993–2001

15.2%

Ronald Reagan

1981–1989

10.2%

Franklin D. Roosevelt

1933–1945

6.2%

John F. Kennedy

1961–1963

6.5%

Lyndon B. Johnson

1963–1969

7.7%

Harry Truman

1945–1953

8.1%

*Returns for Trump's second term are estimates as of July 2025.

Year-by-Year and Cycle Patterns

  • Election years: On average, annual S&P 500 returns during election years since 1980 have been positive but slightly below the long-term average—about 7.1% for large-cap equities, while the overall average since 1979 is closer to 12%.
  • Presidential election cycle: The third year of a presidential term historically delivers the strongest stock market returns, with an average S&P 500 gain of over 17% (1950–2023), while the second year is typically the weakest, and election years (the fourth year) are usually below the 10% long-term average but still mostly positive.

Volatility and Market Drivers

  • Short-term volatility tends to be higher in the months leading up to an election, reflecting investor uncertainty about future policy direction.  After elections, volatility often subsides as markets gain clarity on the economic outlook and likely policy direction.
  • Long-term market performance typically correlates more strongly with economic growth, interest rates, and global events than with any single president or party’s agenda.

Notable Trends

  • Market returns during presidential terms are not strongly determined by party: investors have generally fared well under both Democratic and Republican presidents in recent decades, with annualized S&P 500 returns between 11% and 14% in the last three presidencies (Obama, Trump, and Biden).
  • Policy changes—such as trade tariffs or tax cuts—can spark short-term market rallies or pullbacks, but these effects are often swamped by broader macroeconomic trends.
  • Poor performances during presidential terms are frequently linked to major economic crises (e.g., the Great Depression, the 2008 financial crisis or the 2020 pandemic), not just political events.

Key Takeaways

  • Stock market returns do vary considerably by presidential term, but these returns reflect a complex interplay of politics, economics, and global events.
  • Most election years yield positive market returns, though typically a bit lower than non-election years, largely due to uncertainty.
  • The third year of a presidential term has historically provided the highest average returns, while the second is often the weakest.
  • Over extended periods, investors who remain focused on long-term economic fundamentals, rather than election-driven timing, have tended to experience solid growth.

N. Russell Wayne

Weston, CT  06883

203-895-8877

www.soundasset.blogspot.com

 

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