US stock market outperforms under Democrats, data shows

On the eve of the US presidential election, research has shown that the US stock market has historically performed better under Democrat Presidents than Republican ones, according to Bowmore Financial Planning, part of London and Bristol based financial planning and investment firm Bowmore Wealth Group.

Bowmore’s analysis shows that the S&P 500 has averaged a 55% growth under Democratic leadership over four-year terms, compared to an average of 21% growth under Republican presidencies.

Charles Incledon, client director at Bowmore, noted that while Democrats have generally seen stronger market growth, the S&P 500 has delivered positive returns in the long term, regardless of the president’s political affiliation. “Investors should be reassured that the S&P 500 has performed well pretty consistently over the past sixty years – regardless of who’s in the White House. Thirteen of the last sixteen presidencies have seen positive returns for the US stock market,” Incledon said.

Fate of ESG on “Trump” track

Incledon also pointed out that broader global economic forces play a more significant role in market performance than presidential policies alone. “The global economy is much more to blame for occasional periods of poor performance of the S&P. For example, George W Bush’s presidencies were sandwiched between the dot-com bubble burst in 2000 and the global financial crisis of 2008 – disasters that were almost entirely outside of the Government’s control.”

Historically, Bill Clinton’s second term (1996-2000) was the best-performing presidential term, with the S&P 500 growing by 101%, followed by Reagan’s second term (1984-1988) as the strongest Republican term at 61%. Biden’s term has so far outpaced the Democratic average, with a 73% return.

Incledon highlighted the enduring strength of the US stock market, adding: “There is room for US equities in most investors’ portfolios. The US stock market has delivered strong growth for decades. While there will always be blips, people investing in the US for the long term have been rewarded.

Rupert Thompson, chief economist at IBOSS, part of wealth manager Kingswood Group, in October, pointed out that the US payroll growth fell sharply, partly due to hurricanes and strikes, which alleviated fears of recession that such payroll misses often incite. This downturn makes it almost certain that the Federal Reserve will cut rates by 0.25% this Thursday, he added. Meanwhile, the US presidential election remains a significant focus, with Trump leading narrowly.

“If Harris wins, the reaction might well be a collective yawn, except for the fact that any victory would no doubt be very close and subject to vehement challenge by Trump and his supporters. She would be very unlikely to gain a clean sweep (ie the Democrats control Congress as well as the Presidency) severely limiting her ability to enact her plans to cut taxes and increase spending,” said Thompson.

“If Trump wins, the market reaction is more uncertain. Again, it will partly depend on whether he gains a clean sweep which is more likely for Trump than Harris. If he doesn’t, this would constrain his room to cut taxes but not alter his ability to increase tariffs. A Trump victory is likely to lead to a rather stronger dollar and higher government bond yields because his plans to raise tariffs sharply would boost inflation and reduce the willingness of the Fed to reduce rates.”

In financial markets, the tech giants (Alphabet, Amazon, Apple, Meta, and Microsoft) drew attention with third-quarter results that mostly exceeded earnings expectations, elevating S&P 500 anticipated growth to 8% for the quarter. However, their cautious guidance around heavy AI investment led to mixed reactions, leaving some doubts about whether AI excitement has inflated their valuations too much. The so-called “Magnificent Seven” ended the week with a 1.7% decline, showing investor caution despite positive earnings.

This week promises even greater market impact with Tuesday’s US election, the Fed and Bank of England meetings on Thursday, and China’s anticipated fiscal stimulus announcement on Friday, Thompson highlighted. The global markets are watching closely, as these events will shape near-term economic and equity market directions, particularly in sectors sensitive to policy shifts and fiscal adjustments.