What top advisors say about the presidential election market impact

Many investors worry their investments may be affected by the outcome of the U.S. presidential election.

But history tells another story.

Investment research company Morningstar recently evaluated how the S&P 500 has performed starting Nov. 1 in the past 25 U.S. presidential elections and found the results have been a “mixed bag.”

Forward one-year returns were positive for 10 of the 13 elections where Democrats won, and in nine of the 12 contests where Republicans won, the firm found.

Forward four-year returns were positive for Democrats in 11 out of 12 terms, compared to Republicans who had positive returns in nine out of 12.

“Presidential elections historically have not been nearly as important to markets as most people think,” said Mark Motley, portfolio manager at Foster & Motley in Cincinnati, which is No. 34 on the 2024 CNBC Financial Advisor 100 list.

All presidential terms since President Jimmy Carter saw healthy stock market returns for the full four- or eight-years, with the exception of President George W. Bush due to the Great Recession, Motley wrote in a recent market update.

To be sure, past market performance is not a predictor of future results.

“It’s really hard to predict any sort of market movement based on whoever wins the presidency or whoever controls one or both houses of Congress,” said Joseph Veranth, chief investment officer at Dana Investment Advisors in Waukesha, Wisconsin, which ranked No. 4 on the 2024 CNBC FA 100 list.

Yet there is reason for optimism. The U.S. economy is in a strong position, with inflation trending down and strong growth and earnings.

“All those are positives for the market going forward,” Veranth said.

However, the presidential contest could usher in short-term volatility, particularly if a winner is not declared right away.

Regardless of which party has historically been in power, the markets have moved higher in aggregate, according to Larry Adam, chief investment officer at Raymond James.

Long term, a president’s policies have shown little ability to predict which sectors may fare best, Adam said.

For example, when former President Donald Trump came into office, many said energy was the place to put your money. Yet even with deregulation, record production and higher oil prices, the energy sector was down 8.4% during Trump’s presidential term, according to Adam’s research.

“During his four years, energy was the worst-performing sector by a long shot,” Adam said.

In contrast, energy outperformed during Biden’s presidency — up 24.4% as of Sept. 25 — despite an emphasis on renewables and sustainability that may have prompted speculators to expect otherwise.

While the presidential candidates have been clear on what they plan to do if elected, a lot of what they actually accomplish will depend on the makeup of the legislative branch, said Brad Houle, principal and head of fixed income at Ferguson Wellman Capital Management in Portland, Oregon, which is No. 10 on the 2024 CNBC FA 100 list.

“We don’t recommend that clients make any changes at all,” Houle said of election month.

Ultimately, what will drive long-term stock market returns will be factors like economic performance, as well as stock market earnings and what investors are willing to pay for them, he said.