Red, Blue or Bull? How the Stock Market Performs Regardless of Politics
After retiring from corporate life at the end of 2020, I began frequently watching and listening to CNBC, hoping to learn how not to run out of money before I die. During this election season, I’ve noticed a significant amount of political analysis suggesting that Republican presidents are better for business and the stock market.
However, history shows that the political party in the White House—and even corporate tax levels—doesn’t seem to influence the S&P 500’s performance as much as many believe. Regardless of whether the president is a Democrat or Republican, or whether corporate taxes are high or low, the market has marched to the beat of its own drummer, responding more to broader economic cycles, global events, and corporate performance than the occupant of the Oval Office.
To bust some of the myths I often hear on CNBC, especially during this election season, I dug into the data on S&P 500 performance under various presidents.
S&P 500 Performance and the Presidency: A Closer Look
Ronald Reagan (1981–1988):
During Reagan’s presidency, corporate tax rates ranged from 46% down to 37% after the 1987 tax reforms. Despite initially high rates, the market delivered impressive returns, such as 1985 (31.2%) and 1986 (18.7%). Even after the 1987 market crash, the S&P 500 still posted a 5% gain for the year.
George H. W. Bush (1989–1992):
With corporate tax rates at 34%, the market under Bush Sr. had uneven returns. A 3.1% decline in 1990 was followed by a stellar 30.5% return in 1991.
Bill Clinton (1993–2000):
Under Clinton, the corporate tax rate stood at 35%, yet his presidency was marked by one of the greatest bull markets in history. The market delivered annual returns above 20% multiple times, with 1995 standing out at 37.6%. Strong consumer spending and technological innovation drove this growth, despite relatively high taxes.
George W. Bush (2001–2008):
The market faced significant challenges under Bush Jr., including the dot-com bust and the 2008 financial crisis. Sharp bear markets followed, with the S&P 500 dropping 37% in 2008.
Barack Obama (2009–2016):
Corporate tax rates remained at 35% during Obama’s presidency, as the market rebounded from the Great Recession. The S&P 500 grew steadily, highlighted by a 32.4% return in 2013, driven by central bank policy and improved corporate earnings.
Donald Trump (2017–2020):
Trump’s presidency saw corporate tax rates slashed to 21%, which initially boosted markets. However, 2018 brought a 4.4% decline, and the COVID-19 pandemic led to extreme volatility in 2020. Thanks to massive fiscal stimulus, the year ended with an 18.4% rebound, however.
Joe Biden (2021–Present):
Biden has kept corporate tax rates at 21%. His term has been marked by market volatility, with the S&P 500 falling 18.1% in 2022. However, a strong recovery followed, with a 26.3% gain in 2023. Inflation concerns and global uncertainties have been the main market drivers, rather than tax policy. As of mid-October 2024, the S&P 500 has gained 20.9%, reflecting market optimism driven by economic resilience and shifting interest rate policies.
Conclusion: The Market Has a Mind of Its Own
It’s tempting to link market performance with a president’s party affiliation or corporate tax policies. But the data shows no consistent pattern. Instead, the S&P 500 responds to broader economic conditions, global events, and business cycles.
If you’re concerned about your portfolio during this election season, it’s worth heeding Warren Buffett’s long-standing advice: focusing too much on short-term political changes is a mistake. Buffett has long emphasized the importance of a long-term perspective, citing the U.S. economy’s remarkable capacity for innovation and business growth over decades.
Disclaimer
TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.