Markets and Presidential Elections

Published 11/04/2016

In July, we posted a commentary on markets and presidential elections. With Election Day 2016 fast approaching on November 8, what follows is an excerpt from that article.

Originally posted on on July 18

While some people might find themselves seeking distance from the drama of political rhetoric, others will be captivated and inspired to vote for the first time. As investors, what conclusions should we draw from all that we see now and going forward?

Instead of attempting to predict outcomes from historical data, we can regard it as what it is: information. Just as with other widely known information, market expectations associated with election outcomes are already reflected in prices. Nonetheless, the returns during and after election years provide an interesting look at presidential terms from a market perspective.

Thus, we present that data for the S&P 500 Index, the MSCI EAFE Index and U.S. bonds (as proxied by Barclays US Aggregate Bond Index). For these election periods, there do not appear to be systematic return patterns associated with either the election of a Democratic or Republican candidate.

Even further, this data indicates that the market does not hold bias for or against any political affiliation and it has not had greater regard for either elected party. While the average historical returns shown for the year of the election and the subsequent year were positive, this does not tell us how the market will react to the outcome of the election in November, knowing that other economic factors also play a role in how each year ends.























The information presented is for illustrative purposes only and is not intended to serve as financial or investment advice. Sourced from Dimensional Fund Advisors. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower. Source: The S&P data is provided by Standard & Poor's Index Services Group. Inception date for MSCI EAFE Index: January 1970. Source: MSCI data copyright of MSCI 2016, all rights reserved. Inception date for Barclays US Aggregate Bond Index: January 1976. Source: Barclays data provided by Barclays Bank PLC.

Information is used with the express permission from Dimensional Fund Advisors. Dimensional Fund Advisors is an investment advisor registered with the Securities and Exchange Commission. Consider the investment objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other information about Dimensional funds, please read the prospectus carefully before investing. Dimensional funds are distributed by DFA Securities LLC.