Markets Don't Vote
The midterm elections are now behind us!
The news makes it feel like everything rides on the outcome, and short term noise can easily distract us from long term thinking.
This month I want to walk through four charts that show what actually happens to investors who let politics drive their decisions, and what happens to the ones who stay put.
($10,000 invested in the S&P 500 in January 1950. Staying invested the whole time grew to $4.54 million (8.29% per year). Sitting in cash during election years grew to $980,000 (6.16% per year). Election years as classified by YCharts. Source: YCharts, November 4, 2026.)
This chart above shows us the tale of two investors. One invested $10,000 and jumped in and out of the market during election years. The other invested $10,000 and never touched it again.
The difference is staggering! Just shy of $1M for the skittish investor and over $4.5M for the calm investor.
Investing Only When Your Side Wins
Here is a thought experiment. Take the same $10,000 in 1950 and only invest it when your preferred party holds the White House. The rest of the time, sit in cash and wait for your side to win again.
The investor who stayed invested under Republican presidents ended with about $98,000.
The investor who stayed invested under Democratic presidents ended with about $463,000.
The investor who ignored politics entirely and stayed invested through all of it ended with $4.54 million. The difference between the two parties is a few hundred thousand dollars. The difference between picking a side and staying invested is millions.
$10,000 invested in the S&P 500 since January 1950. Invested only during Republican presidencies: $98,160 (3.02% per year). Only during Democratic presidencies: $462,840 (5.12% per year). Invested the whole time: $4.54 million (8.29% per year). Source: YCharts, November 4, 2026.
Compounding needs time in the market, not timing. Every stretch spent on the sidelines is a stretch where the money is not working, and roughly half of the last 76 years were spent waiting for the other party to lose.
Congress Matters Even Less
What about Congress? People worry about one party controlling everything, or about gridlock when control is split. This chart breaks down average annual returns since 1950 by every combination of president and Congress.
Every combination was positive. There is no mix of White House and Congress that has lost money on average. If anything, the market has done well under divided government, when less gets done in Washington and businesses have a clearer idea of the rules they will be playing by.
Average annualized S&P 500 return, 1950 to 2023, by party of the president and party control of Congress. Source: YCharts.
One caution on reading charts like this. Some of these combinations cover only a few years, and a single recession can swing the average a lot. The point is not that one setup is better than another. The point is that none of them were a reason to be out of the market.
Twelve Presidents, One Direction
This last chart shows the S&P 500 from the Johnson administration through today, shaded by who was in office. In that stretch the country went through Vietnam, Watergate, double-digit inflation, the 1987 crash, the dot-com bust, 9/11, the 2008 financial crisis, and a global pandemic. The index went from about 80 to over 7,800.
Nine of the eleven completed presidencies ended with the market higher than it started. The two that did not both ended in the middle of a recession, which says more about the economic cycle than about the person in the Oval Office. Zoom out far enough and the colors stop mattering. The line goes up and to the right because the companies inside it kept growing.
S&P 500 index level, November 1963 through October 2026, shaded by presidential term. The value shown for each name is the index level at the end of that term. Source: YCharts, November 4, 2026.
Businessess Don't Wait on Washington
You may have heard me say this before, but the stock market is made up of businesses. Those businesses sell groceries, build homes, make medicine, run software, move freight, and keep the lights on. People need those things no matter who won on Tuesday.
Companies do not sit around waiting for an election to tell them what to do. Tax rules change, and they adjust. Tariffs come and go, and they reroute supply chains. Regulations tighten or loosen, and they adapt. That is what management teams are paid to do and the profits of good businesses have a lot more to do with the products they sell than with the party in power.
That is also why diversification matters! A mix that spreads money across large and small companies, different industries, other countries, and bonds does not depend on any one policy going a certain way. Some pieces benefit from a change in Washington and some do not, and the plan does not hinge on guessing which is which.
Every chart in this letter points the same way. The investor who stayed put beat the investor who sat out election years. The investor who ignored party beat the investor who picked one.
The market climbed through twelve presidencies which included every combination of Congress, and every crisis along the way. Elections certainly matter for the country, and our civic duty is extremely important, however the results of elections just make a poor reason to change a long-term investment plan.
The best approach is to stick to the game plan, keep saving, keep debt low, spend time with friends and family, and let go of the things outside our control.
If you have questions or concerns about how any of this applies to your own plan, please don't hesitate to reach out.
Best,
Alex Potter, CFP®
Midterm Fact
Midterms are rough on whoever holds the White House. Since World War II, the president’s party has lost an average of about 26 House seats in a midterm, regardless of party.
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