Mark Twain is often credited with the statement:

With mid-term elections upon us, we are (again) being led to believe that the result of this weeks event will create obvious outcomes in the financial markets.

In response, today I'm sharing some data around prior elections and highlighting that future investing results probably won't be what most people expect.

Election History

Recently, I came across this chart that I thought offered some interesting (and helpful) insights.

A few questions worth asking as you consider the data:

• Prior to the last election, would you have guessed that energy would be the best-performing sector under Biden?
• With all the talk about energy and infrastructure under Trump, would you have guessed that energy would average a return of negative 16% per year during his time?!
• Or, given that Trump's business reputation is derived from real estate, that real estate would be the second worst-performing sector during his presidency?
• Would you have predicted that the three best-performing sectors would be the same under Trump as they were under Obama?
• Or that Biden's sector performance would mimic that of President Bush?

I think the answers to these questions are rhetorical because the outcomes don't align with our political assumptions.

As successful as many of these politicians are at giving their respective side hope, campaign promises have surprisingly little to do with investing outcomes.

There are two main reasons for this.

First...

Each market sector is represented by businesses, not government conglomerates.

As such, they are run by intelligent managerial teams who make decisions based on the current legal, economic, and geopolitical environments of the time, irrespective of the dominant political party.

Second...

The world changes in ways we can't anticipate -- and those changes often have little to do with politics.

For instance, the performance of the energy sector under both Trump and Biden has a lot to do with what happened with oil prices during their respective tenures.

And oil prices are a complex global issue with far more variables in play than who is in the White House or which party has the majority in Congress.

The same complexity argument is true for every sector of the market.

While it may go without saying, our $100 Trillion global economy is incredibly complex and impacts businesses in ways that we could never imagine in advance.

I wanted to offer these thoughts because elections often cause worry for investors, which can encourage emotional decisions.

But the data is pretty clear that regardless of how the election turns out (good or bad from your perspective), the investing results that follow probably won't be what most people expect.

This is why we diversify. And why we stay focused on the things we can control.

Additional Resources

If you're interested in more historical election data, check out this guide I put together a couple of years ago for Stay Wealthy listeners: Market Returns During Election Years​

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Stay wealthy,

Taylor Schulte, CFP®