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Here’s the Average Stock Market Return Under Democratic and Republican


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The S&P 500 (^GSPC -0.20%) is one of three major U.S. financial indexes, but its scope and diversity makes it the best barometer for the overall stock market. The index tracks 500 large U.S. companies that span all 11 market sectors, and it includes value stocks and growth stocks that account for 80% of domestic equities by market capitalization.

The S&P 500 advanced 30% over the past year as investor sentiment has flipped from bearish to bullish. Factors contributing to that change of mood include surprisingly strong economic growth, better-than-expected financial results, enthusiasm about artificial intelligence, and hopes that the Federal Reserve will begin cutting interest rates soon.

However, with the next presidential election just months away, investors may wonder how the stock market has performed under Democratic and Republican presidents. Read on to learn the answer.

The average stock market return under Democratic and Republican presidents

Since its inception in March 1957, the S&P 500 has increased 11,830% in value, compounding at 7.4% annually. That compound annual growth rate (CAGR) does not account for dividends doled out along the way, meaning the total return would be much higher.

The following chart shows the S&P 500’s CAGR during each presidency since the index was created. It also shows the average CAGR and median CAGR under Democratic and Republican presidents.

A chart showing the S&P 500's compound annual growth rate during each presidency since March 1957.

The chart shows the compound annual growth rate of the S&P 500 during each presidency since the index was created in March 1957, color-coded by Democratic presidents (blue) and Republican presidents (red).

The S&P 500 has achieved an average CAGR of 9.8% under Democratic presidents and 6% under Republican presidents. However, the index has achieved a median CAGR of 8.9% under Democratic presidents and 10.2% under Republican presidents. That means both political parties can correctly claim the stock market performs better when they control the White House.

We can also look at the problem from a different perspective. The next chart shows the S&P 500’s return in each individual year since March 1957. It also shows the average annual growth rate (AAGR) when Democrats and Republicans held the presidency.

Chart showing the S&P 500's return in each year since its inception in March 1957.

The chart shows the S&P 500’s return in each year since its inception in March 1957, color-coded by Democratic presidents (blue) and Republican presidents (red).

The S&P 500 achieved an AAGR of 11.4% under Democratic presidents and 7% under Republican presidents. Those figures are useful because they provide context on year-by-year performance, but there are two major flaws in the chart.

First, presidential inaugurations are slightly offset from calendar years because they usually occur on Jan. 20 following an election year. Second, AAGR is generally an inferior measure of performance compared to CAGR because it does not account for compounding, which makes it a very misleading metric.

For instance, consider a hypothetical stock worth $100 per share. If the stock…



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