Vanguard recently published a study on performance of a 60% stock /40% bond portfolio in election years vs. non election years. The data goes back 160 years and starts with a Lincoln win in 1860 when he took 180 of only 303 electoral votes to become the nation’s 16th president. Ladies and gentleman, here are the results:
- Average return in an election year: +8.9% (40 elections)
- Average return in a non-election year: +8.1% (120 non-election years)
But that’s just calendar year data…what about all the volatility surrounding elections?
- Average volatility 100 days before the election: 13.8%
- Average volatility 100 days after the election: 13.8%
- Average volatility over the full time period: 15.7%
On average, U.S. markets perform slightly better during election years and have lower than average volatility surrounding the actual election date. Our own conclusion is that the likelihood of a market selloff is no better or worse because we are holding a presidential election in November. No one wants to believe it, but this is what the data tells us. These are the numbers and the numbers don’t lie.
Click here if you’d like to read the data directly from Vanguard.
