Let’s take a look at the historical stock market performance under Democratic and Republican presidents. The annualized S&P 500 return by president is remarkably consistent over time.
But before diving into the data, take a guess: under which party do you think the S&P 500 has performed best? From there, we can compare the facts with your expectations.
After all, one of the keys to being a successful investor is removing as much bias as possible from your process. Investing on emotion is suboptimal.
For instance, I know several people who sold most of their stock holdings in 2016 after Donald Trump won the election because they couldn’t stand him. As a result, they missed out on over 150% in S&P 500 gains. Oops.
Now Trump is set to be president again after handily defeating Kamala Harris in 2024. Will Democrats vehemently against Trump sell their investments in disgust again? Perhaps.
Stock Market Performance Under A Democratic Or Republican President
Below is a wonderful chart that shows the stock market performance under a Democratic and Republican president.
Your first reaction should be that the S&P 500 index doesn't really care if a president is a Democrat or a Republican. The index keeps marching higher regardless of who is in the White House.
But upon closer inspection, it looks like between 1968 – 1978 and 2000 – 2009, both periods under Republican presidents, the S&P 500 didn't go anywhere. In contrast, the S&P 500 has advanced higher under every Democratic president since 1933.
Therefore, if you are a stock investor, then at the margin, you should be rooting for another Democrat as president starting in 2025. However, let's look at the stock market performance details by president a little more closely.
2022 was an abysmal year for the stock market for President Biden. The S&P 500 went back in bear market territory, inflation was at 40-year highs, and there's a war in Ukraine. But 2023 and 2024 turned around and the S&P 500 is now at a record high.
However, due to the effects of inflation, there is a silent recession going on that puts the Democrats hopes for a second term in danger.
Stock Market Performance By President
Eyeballing return charts is fine, but it would be better to get more specific numbers. Therefore, let's get more granular and look at US equities annualized returns under each President.
From the chart, we see that Bill Clinton tops the charts with roughly an 18% annualized equities return during his presidency. Bush Junior was the worst performer with a -3% annualized equities return under his presidency. Bush Junior was unlucky because of 911 and the wars.
If we exclude Bush Junior, we see that of the top six performers, three are Republican presidents. Therefore, it seems like a push between having a Democrat or a Republican as president for the benefit of the stock market.
In my opinion, any annualized equity return 10% or greater is a home run. After all, the historical return for stocks since 1926 is about 10%.
Most investment houses have much lower future returns over the next 10 years. Check out Vanguard's future return assumptions for stocks, bonds, and real estate below.
Meanwhile, Goldman Sachs believes the average annual return for the S&P 500 will decline to about 3%. Such a low stock market return, if it comes true, would give the next two presidents the worst stock market return next to Bush Jr.
S&P 500 Annualized Return By President
The annualized S&P 500 performance under Donald Trump was 16%, higher than under Barrack Obama at 15%. The vast majority of investors are better off four years later, regardless of who is president.
A President Doesn't Really Matter For Investment Returns
The main lesson of this article is that a Democrat or Republican president doesn't really affect your investment returns. As there are so many variables that influence the S&P 500's index performance, who is president is not a significant factor.
The same thing goes for the CEO of a large publicly-traded company. If Tim Cook at Apple retired tomorrow, do you think the event would make a difference in Apple's share price? There might be a knee-jerk move for one or two days, but after that, it would be back to business as usual. As a result, if you want to get rich, your goal is to try and become an overpaid CEO.
Instead of voting for a president who you think will be best for your investments, vote for a president who you think will do the most good for the most number of people. A country begins to rot if only some people get way ahead while others are left behind.
Since 2009, I've been driven to try and help people improve their financial lives no matter who they are or who they vote for. I've found that people who are more financially secure are nicer and happier people. More good comes out of the world as a result.
I don't believe only the rich, powerful, and connected and their children should get ahead. They've already got all the resources in the world that money can buy. Therefore, Financial Samurai will continue to be free for as long as I'm alive.
How Each President Has Influenced My Financial Planning
One thing I do want to recognize, however, is how two presidents from different parties affected my financial planning. Presidents do affect tax policy. And tax policy affects behavior. Stock market performance is just one part of financial planning.
Financial Planning Under President Obama
Barack Obama was president from January 20, 2009 – January 20, 2017. He came into office just six months before I started Financial Samurai.
In a way, President Obama felt like a savior at the time because things were so bad in 2009. It was a very concerning time because I had lost 35% of my net worth in just six months and many of my friends and colleagues had lost their jobs. It was almost deja vu again in 1Q2020 until the Federal Reserve unleashed the largest economic stimulus package ever.
As the economy began to recover post 2009, I gained more peace of mind and confidence. I decided to work as hard as I could to build back up the net worth that I had lost so quickly.
Higher Taxes Disincentivized Work
However, when President Obama raised income taxes and introduced the additional 2.3% Net Investment Income tax, I started to lose steam. I was already burning out from working 70-hour weeks. Getting pin-balled around in the game of corporate politics wasn't fun either.
Not one to complain, I decided to negotiate a severance in early 2012 to be free. I've credited my severance package and passive income as factors that helped me retire early.
However, I should probably also credit President Obama for giving me added motivation to finally take it down a notch. Once I started paying higher than a 40% marginal tax rate between federal and state, I no longer wanted to work as much.
Forsaking money and relaxing more since 2012 has been very good for my mental and physical health. Once I left work, a lot of my chronic pain began to go away. I was happier.
Financial Planning Under President Trump
When Donald Trump officially became president starting January 20, 2017, I also noticed my financial outlook began to change.
After President Trump passed the Tax Cuts And Jobs Act of 2017, I started getting motivated again to make more money. I had taken a five-year break from the grind and felt ready to earn again. I became a little more excited about stock market performance to make more money.
The tax cuts also corresponded with the time my son was born. I don't know what it is, but there must be some genetic predisposition to try and make more money once you have a child.
The idea of going back to work started consistently entering my mind in 2018. Not only could I start making more money to take care of my family, I could also get some subsidized healthcare.
At the time, our monthly healthcare premium had grown to $1,890. With another $2,000 a month in upcoming preschool expense, my retirement income streams were to finally be tested.
Gift Tax Exemption Amounts Per Person
Another thing that happened under Donald Trump was a massive increase in the estate tax threshold. When it doubled to $11.18 million per person in 2018, it was as if someone pressed my internal “Let's go make some money!” button. In 2024, the estate tax exemption amount is $13.6 million per person.
Instead of going back to work, I decided to focus more on online entrepreneurship. Further, with the global pandemic keeping me at home more, I thought I might as well try to make more money online. Progress has been made so far. Both my wife and I are still able to be stay at home parents to our two children.
However, I don't think I'm happier overall. Maybe more content because I've become a father and am able to take care of my family. But happiness is elusive.
From 2020 to 2021, the pandemic and the lockdown environment hurt our lifestyle. I wasn't able to live as freely as I once did. But the other reason is that the endless pursuit of more money is not fun.
It feels better to be satisfied with what you have.
Financial Planning Under President Joe Biden
With Joe Biden as president, financial planning comes full circle. I retired under President Obama and I have long thought of re-retiring under Joe Biden.
Because the Democrats have control of both houses and the presidency, I thought more taxes and higher tax rates would occur. There will also be more spending to help all citizens. As a result, I planned to take things down a notch after the pandemic subsided.
I was tired of all the hustle during the pandemic, writing a WSJ bestselling book, Buy This Not That, for example. I was burned out and I want to spend my money and live it up more.
Luckily for investors, stocks and real estate have performed well during and after the pandemic. Therefore, we have an even larger cushion to live our lives as freely as possible.
However, because I decided to buy another forever home I did not need in October 2023, I've now got to grind my way back to financial independence. The plan is to keep writing, saving, and investing until December 31, 2027.
Thankfully, home prices and the stock market kept marching to new highs in 2024. Now the Fed is embarking on a multi-year interest rate cut cycle, which should help provide a tailwind for risk assets going forward.
The Upside To Higher Taxes
There's always a never-ending amount of money to be earned. So if money is what you start mainly focusing on, you'll eventually become miserable. Once you get over one hurdle, there is always another income or wealth hurdle to overcome.
The pursuit of money can be very exhausting.
Therefore, if and when taxes are raised in the future, it may help quell the desire to earn more money. If taxes are raised, all I ask is that more families get more healthcare relief. Healthcare is truly on of the largest and most ominous expenses all Americans face. We need healthcare reform!
If you enjoyed this post, you should also read about stock market performance during rate-hike cycles. Thankfully, the Fed finally embarked on its multi-year interest rate cut cycle in September 2024.
Expectations are that the Fed will continue cutting rates until the end of 2025, when the Fed Funds rate is set to decline by a total of 2% to 3.25% – 3.5%. If this is the case, mortgage rates should decline somewhat, making housing more affordable. Then again, home prices could easily continue marching higher.
Track Your Stock Market Performance
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After a great run in stocks, another recession could hit. It's always a good idea to get a second opinion about how your investments are positioned, especially from a professional. No matter who is president, it's always good to have a financial plan.
Diversify Into Real Estate
Stock market performance has been consistently strong no matter who is in the White House. The same can be said for real estate. Given interest rates have come way down, the value of rental income and cash flow have gone way up. Therefore, I'm personally buying multifamily properties and rental properties for capital appreciation and income. Stocks also tend to be more volatile than real estate.
One of the best ways to invest is through private real estate to diversify and earn more passive income.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eREITs. The real estate investing platform has been around since 2012 and now manages over $3.2 billion for over 350,000 investors. Fundrise is my favorite platform due to its diversified funds. They primarily focus on investing in the Sunbelt region where yields tend to be higher and valuations lower.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields. They also have potentially higher growth due to job growth and demographic trends.
I've personally invested $954,000 in real estate crowdfunding since 2016 to diversify my investments. It's nice to earn income 100% passively as I spend more time taking care of my children. Both platforms are sponsors of Financial Samurai and Financial Samurai is an investor in Fundrise.
Stock Market Performance By President is a FS original post. No matter who is the next president in 2025, keep on saving and investing for your future. The ultimate decider of your fate is you!
This was an interesting read. But, today is 7-12-22. The stock market has been tanking for months. My retirement is down by 30 % to 35% with no end in sight and I am going to retire in the next 5 to 10 years, so I guess in my mid 60s I will have to find some kind of job in order to survive. Some of this is due to the democratic president, Biden, closing down all the oil production, which lead to a lot of bad economic stuff. So, where are the higher returns that I should enjoy with a Democratic president. I am still waiting…….
Results may vary.
12-24-23
Market is up 24% this year.
—
If your portfolio lost 30-35% as of your posting date that is no one’s fault but your financial advisor.
Blaming your losses or crediting your gains to a President is overly-simplistic and lazy.
It’s amazing how quickly the markers can turn!
The historical stuff is before the Democratic Party lost their minds and decided we can be the first socialist society to actually make it work. This is not your father’s Democratic Party. So, it matters more now than ever, especially if the US turns into the next Venezuela. Doubt it can happen? I mean, who would have thought rioting and looting would be tolerated in liberal cities all over the country without one critical word about it at the DNC.
Here we go with someone that doesn’t understand democratic socialism vs socialism.
One of the most popular POTUS in our history would be called a socialist today, FDR.
MLK would be called a radical leftist today and yet many love him.
Turn off fox news and pick up a book or something.
And stop with the oMg vEneZuElA garbage
No one here wants that, we just want to be like most other advanced countries, like Canada, Sweden, Denmark, Norway.. none are socialist countries…
You’re right. I don’t understand “Democratic socialism.” LOL
“Pick up a book or something. Turn off Fox News. No one here wants that. We just want…”
“No one here”…”We”…LOL “Turn off Fox News and pick up a book or something.” The modern Democratic Party (i.e., “mob”) can certainly make socialism work when no other society has ever been able to do so. Their figurehead candidate can’t even complete a sentence or answer pre-selected softball questions without a teleprompter. A CNN (fake news) follower giving news programming and reading advice. Too funny!
“We’ just want to be like most other advanced countries, like Canada, Sweden, Denmark, Norway.”
The DNC made it very clear what a hellscape the US is. Nothing is preventing you from fleeing to any of those “other advanced countries.” Take a friend with you!
Sounds like the typical right-wing response to the Vietnam War protests – “America – love it or leave it!” But, in the aftermath, even the then-Secretary of Defense, Robert McNamara, was moved to apologize for the enormous mistakes that were made by the warmongers. The right-wingers were wrong, and the left-wingers were right. Future historians will wonder what got into so many Americans that we turned into a fascist nation from Ronald Reagan on, with the 1% owning half the wealth of the country, and 50% living in relative poverty, with food deserts, inadequate healthcare, rampant racism, police brutality against all non-whites, and general hardness of heart towards the disadvantaged among all those who felt secure in their privileged status.
What is your criteria for “right wingers ring and left wingers correct? Is because you don’t think we should have gone to Vietnam ? Well, that would be Kennedy and Johnson’s fault both (left wingDemocrats )
jax11 ~ you might want to dig out a history book…
Sadly you all are just playing volley ball with what you heard on the media, whichever media you follow. The media, no matter which one it is, is just pushing agenda. News stopped being profitable long ago.
These modern nations with healthcare for all don’t produce it out of thin air. Come across any stories by the locals who live in those countries and you quickly learn the waiting lists to see doctors are long and the quality of care received is watered down. How else do you spread a small number of practitioners and facilities across an entire population with everyone entitled to see the doctor at the expense of the whole population’s taxes. Anyone with money that can afford it goes to a private doctor of their own choosing who’s quality of care matches the amount of money they have to spend. You will read the same tales in magazines and web sites of companies selling info about living as an expatriot in a foreign nation.
As far as the Dems turning US into the next Venezuela, it’s conceivable. They accuse everyone else under the sun of crimes they are committing. They are famous boomerangers with what they do coming back to hit them. Just give them time and their lack of understanding of what produces profit in a company will have you remembering portrayals of Evita Peron thinking she could remake Argentina society just by taking the money from corporations.
More than anything though, you guys don’t understand anything other than you have watched news channels and you can regurgitate what the news channels that appeal to you most recite on a daily basis. Those news channels are only doing it to pull in their cash flows and mouth their masters’ agendas. The only people who really know what is going on are insiders and if you stop to notice, none of them tell anyone what’s going on.
Couple of notes :
1. “Bush Junior was unlucky because of 911 and the wars.” While I appreciate the attempt at diplomacy, it’s pretty hard to dismiss him as “unlucky” when his administration initiated the War In Iraq.
2. The wars weren’t the reason for the poor stock market performance during the Bush Presidency. The financial collapse of 2008 was. History will show that stock markets have marched higher regardless of periods of war.
3. This entire article is an oversimplification based on an extremely small sample size. Had this pandemic not fallen on an election year, you would never have seen politicians on both sides of the aisle lining up to cast aside any semblance of fiscal responsibility in order to prop up the markets. If this very same thing had happened in 2017 instead of 2020, your result would have differed drastically from “the stock market doesn’t care” conclusion that you’ve reached here.
Sure, sounds good. What do you think the stock market will do in 2021 Based on who wins? And how are you positioning your investments?
Sorry, I can only criticize. Providing analysis and value is too difficult.
No worries. I totally understand how it easier to criticize then provide solutions or analysis.
But I do recommend you try. Otherwise, you’ll just be complaining. And complaining leads to misery. Take action instead.
I’m late to the party on this one, but what I’d be interested in seeing is a chart that goes from election day to election day instead of inauguration day to inauguration day. The stock market is very forward looking – it prices in what it thinks will happen in the future. Using the most recent example, I seem to recall there was a pretty strong “Trump bump” in the market between election day and his inauguration day. Meanwhile, the charts in this article (and every similar article I’ve seen on the topic) give the outgoing President the credit for market performance between election day and inauguration day. That doesn’t make much sense, because the market has already moved on from the lame duck President after the election and immediately prices in the expected policies under the President-elect. I volunteer Sam to do this data analysis :)
For sure. After almost 70 years of data, it’ll probably look the same.
Feel free to contribute and create one and write a report on what you find out! Thanks
I know you get a lot of hate and other negative messages (or at least that’s my impression from your comments in your posts and newsletter), so I just wanted to say I really liked this post. I found the content both interesting and quite positive!
Keep up the good work ;)
You also should consider the majority party in Congress. The Clinton years were great but not until the Republicans took control of Congress starting in 1995.
It seems like Trump has awoken your desire to make more money. The level of income Americans need to reach their peak emotional well-being and life satisfaction is about $105,000. So I’d say you’re doing just fine in the income department. Maybe you should consider spending time on things that make you most happy. :)
No one even bothers to mention that any increase in wealth taxes on the ultra wealthy will only result in either a larger deficit or higher taxes for the rest of us. Itemized deductions benefit the ultra wealthy much more than the rest of us and charitable deductions alone cost the government untold billions in lost revenue. I suspect the mainstream media fails to include this in any calculations as to how much more revenue would be generated by this wealth tax.
Is there a way to measure the financial policy being operated by each president? For instance, the stock market might have performed better under a certain president, but because he left the regulations passed by the previous president untouched.
As far as taxes, I’m not too concerned as to whether wealthy people feel more or less motivated to work due to higher taxes* (and I’m in that group). As a country we can’t afford such frivolous concerns anymore. It’s like worrying about some dust on the floor while the house is on fire. Let’s get our sh*t together first: fix healthcare, upgrade our infrastructure, fund universal pre-k and paid leave for parents, fund public education at all levels better, and fund the post office for starters. Honestly it’s irrelevant how much these items cost in debt or taxes; without them we have no future. Would I prefer low taxes and or no debt? Sure, but that’s not an option for us at this point. Plus, as you point out, I think we’d all be happier as a country if we worked less, enjoyed life more, knew that other people weren’t needless suffering and didn’t have to worry about stuff like healthcare costs!
*Also, your observation about Tim Cook goes for most earners in the top .1%. Life would go on just fine if most decided to pack it in and retire due to higher taxes (which is so absurd I can’t believe we have these debates in this country). It’s a different story when it comes to teachers, fire fighters, police officers, nurses, grocery store workers, mechanics, powerplant workers, waterworks works, sanitation workers and all the other people who really are essential to our everyday existence.
Spot on
Adding Federal sales tax would do it. Most countries with universal healthcare and benefits you list pay for via sales tax. VAT,… and those citizens approve.
Getting lost in an endless pursuit of money is a terrible idea.
I just want enough so that when we retire we can up our lifestyle just a bit, travel a lot, get a nicer place in a less crowded area, and spoil the grandkids . . . and watch our net worth continue to increase faster than inflation. That’s how i define freedom from worry.
If the inheritance taxes get a bit of it before the kids do, by itself, that’s not a huge concern to me.
I agree with the premise that higher taxes might quell an unquenchable thirst for more Benjamins. Not sure it’s a disagreement but I think this is a BAD thing for the general population because it also quells some innovation and growth.
Higher taxes are very successful at dampening entrepreneurship.
Agreed!! Give others the chance who wants to work hard and earn, a fair chance with the right incentives for growth.
Maybe. Tax changes goes in cycles. Ebbs and flows.
Chase money, innovation, entrepreneurship for too long and you burn out.
It’s nice to take things down a notch and recharge.
Like sleeping. Your mind heals to then create new things. A lot of times I sleep on a post now Instead of publishing before going to bed bc new things come to me.
The type of people who are driven to be entrepreneurs will still be that way even if they eventually had to pay, let’s say, another 10% of marginal taxes on their (possible) eventual windfall. And if the higher taxes go to things like improved infrastructure, healthcare and education, they will reap many more benefits along the way while they are building their businesses.
I think the benefits one might “reap” would be completely subjective depending on the person. I agree with Financial Samurai about the Ebb and Flow of taxes on an economy but don’t believe that the “Ebb” is always necessary. Maybe so.
I personally work with business owners that often tell me that the taxes they pay for inventory, employees, etc are getting to the point where they’re not sure if they will or even want to stay in business anymore. Just today I spoke with a business owner that had 6 employees and now has 1 because of the employee tax he has to pay.
This is anecdotal but I think it’s safe to say that it’s a pretty common thing across the US.
Really appreciate this conversation happening.
Thanks, Sam. You confirmed what I’ve suspected for a long time.
And what is that exactly Cary?
That’s a good read, one thing that might be different in the future is the concept of a wealth tax. It is definitely a Democrat idea and a very scary one to me. Since wealthy people are a minor part of the population we are a great target for taxes and with so much wealth concentrated in the hands of frugal Boomers that might be the most direct way to take it from us.
So to summarize what you said-
“Under Obama higher taxes made you want to work less because there was less incentive and under Trump taxes went down which made you want to work more bc there was more of an incentive”
Forgive me but seems counterintuitive to your statement that “it was better under Obama”
I am not offering an opinion as to who is better just using your logic would seem Trump bc people keep more of their earned money with more incentive to create more wealth.
By the way I love the site and the info you provide.
Yes, bc during Obama’s time, I decided to stop working in finance after 13 years. I was tired and the incremental taxes I had to pay didn’t seem worth it. He wasn’t the main reason by any means.
Health and life is more important to me than money. Money is only a means. Less stress, equals more happiness. Everybody’s situation is different.
How about you? What did you do during the time Obama was in office? And how about since Trump?
I have done well under both since my net worth is mostly In assets that appreciated- stocks and real estate. In my primary job healthcare, has been greatly affected negatively after the affordable care act. My side hustle grew tremendously however.
Under trump my primary job is better but the pandemic killed my side hustle, the events business.
My view is that it is low interest rates and access to capital that gives you the opportunity to create wealth- and that is due to the Fed which has basically kept rates at zero for 12 years.
My view is that there are always opportunities no matter who is office- as long as the US does not swing to either extreme.
Ok, therefore, I see how you would not like Obama given your primary job was negatively affected.
It also depends on the state of your finances. Less regulation and lower tax rates are great. But if he can help but she’s more financial opportunities under this scenario when you already feel like you had enough, then there’s this unhealthy addiction to money.
I left into thousand and 12 because I thought I had enough. But then the bull market continued and tax rates changed in 2018. It’s been good to boost well to be able to better take care of my family. However, I’m tired.
Instead of always paying a massive tax bill and paying big healthcare premiums and no support, I wouldn’t mind taking a break and going the other way.
Again, depends on where you are on your financial journey, how much longer you have to go, and how hard you’ve been working. Where are you?
Only the pursuit of money is a fool game. When I had 2 million I said I’d be content when I had five million. I was no happier because now I wanted 10 million
There was never enough. Now I play,the market for fun. Tesla is fun. In the last year, I made money than is reasonable. But I play Tesla for the fun of it, not how much
money I will make or lose. Money is no longer my objective. How well I play the game is what counts. And that has made all the difference in the world. The game is when do I sell or do I hold on. This is a fantastic game. The stakes are high and i have to decide 16 when the dealer has a face card. Win or lose the game was fun. Markets are no different. When to hold them and when to thrown them..making money is only a small part of what is really going on. I believe if you aren’t having fun, find a different game to play.
Maybe you will be happier once you get to $10 million or $20 million. You won’t know until you get there! :)
Classic. I remember asking my boss one day what his number was (To Retire) and he replied with…”More”
Will never forget that.
Thank you Sam for your thoughtful insights!
“If we exclude Bush Junior, we see that of the top six performers, four are Republican presidents. Therefore, it seems like a push between having a Democrat or a Republican as president for the benefit of the stock market.”
Actually it’s 3 and 3 on the chart, 3 Republican and 3 Democrat. Further validating your point that the party in power is irrelevant.
Eagle eye! Jimmy Carter was a Democrat! Nice job.
What exactly are the assumptions that go into that SP 500 graph above?
It includes dividend reinvestment, of course. But what about taxes on dividends? and fees?
I wonder if this chart would look any different adjusted for inflation. Seems to me that Fed policy would have a larger impact on equity prices than whomever is in the whitehouse. Our current president seems hell-bent on influencing the Fed in order to boost his public image.
You mentioned in an earlier comment that having $1 million in assets in 1933 would place a family in the top .1%. I was thinking about that and tried to calculate the compounding rate of return on the S&P500 from a few time periods, this is what I came up with:
1928 to present: 2.83% (earliest data point)
1954 to present: 3.95% (great depression recovery)
1981 to present: 5.79% (year I was born)
Does this look accurate to you? It seems low. I’m wondering if my calculations don’t include Dividends, and how big of an impact on returns that would make.
Based on the numbers I got in Excel, I got 7.68% Compounding Rate of Return and 5.84% Annualized Rate of Return from 1928 to present.
The Compounding RoR was calculated by summing each years RoR, and dividing by 93 (years of data). ARoR uses the RRI function in Excel (93 years, 17.76 first SP#, 3478.73 latest SP#)
I was adjusting for inflation which gave me a starting point of $263.15 in 1928 according to macrotrends. Then I did an XIRR function in excel to return 2.83%
I tried the RRI formula using the same two data points and it returned 2.82%.
=RRI(93,263.15,3484.55)
Your compounding rate of return formula can’t right. Thats just an average of the annual return. This doesn’t work mathmatically becuase a 50% up year does not have as big an impact as a 50% down year. E.G.
50% annual gain = 33% increase in value
50% annual loss = 50% loss in value
I agree with Dollartrak. I’ve seen sites that indicate the lag time from one presidency to the next to try and smooth this out. In either case, I concur with Sam’s main thesis here that the markets move for either party. However, I think the taxation is quite different, not just in terms of marginal tax rates for higher income individuals, but also tax breaks on real estate, deductions, SALT, etc. depending on the party which can again encourage or discourage certain kinds of income and revenue.
Nice article FS. Specially now that everything is about politics. Facebook is full of just politics nowadays.
It really does not matter who is at the WH, as you pointed out. Democrats or Republicans mean little to the stock market. However, their policies do affect the mood and the business environment. Fiscal and monetary policy can add or remove incentives for people to invest or start new businesses. Or they just stay home and collect from the government, welfare and all. Whether Republicans or Democrats are better it is up to debate.
However, I do want to point out and I am sure you know this since you and I were in Wall Street working for some years. The S&P 500 during the last three months before the election has predicted whether the political party who has the keys to the WH stays or leaves. If the S&P 500 is up during the last three months, Trump wins. If it is down, Trump is out. This has been right the last, I think, 21 of the 23 times it has been tracked.
By the way, I love what your wrote here:
“I don’t believe only the rich, powerful, and connected and their children should get ahead. They’ve already got all the resources in the world that money can buy. Therefore, Financial Samurai will continue to be free for as long as I’m alive.” Sam the Financial Samurai.
Thanks and I did not know that Bill Clinton was this that great for the economy. Nice.
The Economy Chief.
Would it be fair to say that stock markets have no bearing on which party controls the presidency or is there a lag where a presidents policy in his term becomes effective after his/her (still waiting) presidency ?
I feel like this election is different. Lobbying openly for socialist policies are not typical of what the market has seen previously in this country. Once masses decide to take it down a notch then a decline is inevitable.
Am I wrong?
Couldn’t agree more!
Are you calling a centrist in Biden a socialist? Come on now.
Plus, FDR pushed socialist policies so yes, our country has seen it before. Helped people weather the great depression, of course WW2 helped a lot as well.
This is a really interesting read – Thanks Sam!!
Looking at that first chart makes me wish I had a grandparent who had invested $1 million in the S&P 500 index in 1933 and left it untouched all these years.
Me too. However, $1 million back in 1933 means that you came from the top 0.1% family of Wealth.
I’m sure our kids and grandkids will wish they could invest right now as well.
Interesting article and as a mother of 3, I think I may understand why you are tired. I was an at home mom and that in itself was a full time job. Now I work part time and have one child at home. It’s more exhausting now. And I really would prefer still being an at home mom, and we all need to eat. All my best to you and your family!
Thanks! Yes, very exhausting but blessed.
I could decide to write less to be less exhausted, but there’s just something in me that refuses to quit. I want to actually write more and do more updating of old posts and make them better.
The desire is to come out of this pandemic stronger and better. I don’t wanna look back and be disappointed in myself for not taking advantage of my free time with my family and with FS.
I feel now is the ultimate test of will. I will not fail.