Now that we have your attention with that eye-grabbing title, there’s definitely something to the idea that stocks perform better the year after a sitting president wins reelection. “Think about it—usually when a president wins reelection, it means the economy is going pretty strong, so stocks tend to do well,” explained LPL Financial Chief Market Strategist Ryan Detrick. “The flipside is that new leadership in Washington can bring with it potential change that could rock the boat and hold stocks back.”
Since 1950, the S&P 500 Index has added an average of 9.6% in the year after a president wins reelection. In fact, after Presidents Ronald Reagan, Bill Clinton, and Barack Obama won their reelections, stocks gained close to 30%.
When there was new leadership in Washington, the S&P 500 added only 4.8% the following year, and it has been higher only 50% of the time.
Lastly, as shown in the LPL Chart of the Day, we combine the two charts from above, showing that stocks have tended to do better the year after a president has won reelection than when a new president takes office.
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