Election years breed uncertainty, and in general, the market does not respond well to uncertainty.

It is tempting to speculate how each candidate might affect your investments, but making decisions based on unknowns could cause long-term harm to your portfolio. The key, just like in any other year, is to make investment decisions based on logic. So, what does logic tell us about investing in an election year?

While data from previous years cannot guarantee the same pattern this year, it is a great place to begin a logical assessment. Historical data shows stock value rising over time, regardless of which party held office.

The S&P 500 Index –  a widely trusted metric of overall stock market performance – shows remarkably similar one-year investment returns since 1961. Most administrations hovered around a 40% market return rate and experienced a 15% to 20% decline during the four years, irrelevant of party name.

Comparing returns during Donald Trump’s and Barack Obama’s administrations, two polarizing candidates, is also enlightening. The average annual return was 16.3% while Obama was in office; it was 16% during Trump’s presidency. These numbers are almost identical, with both of them nearly 6% above average. So, no matter how polarizing these two candidates were politically, the market demonstrated notable indifference.

But what about the outliers? In 2008, for example, when Obama was elected, markets fell 38.5%. At first glance this could spark fear about a Democrat winning the election, but more context is necessary to judge this statistic. The beginning of the financial crisis was in 2008, a poor coincidence for the election.

The year 2020 was another unlucky election year. The S&P 500 took a dramatic drop as COVID-19 hit, then climbed back up in time for Biden to take office. All signs indicate that factors other than presidential candidates are responsible for downturns.

That is not to say politics have no influence on the economic landscape. Fiscal policy can impact many industries, and the president executes those laws. However, the president is only one part of one branch of government; the secretary of the treasury and Congress also regulate fiscal policy. Even when one party controls Congress as well as the Oval Office, it is increasingly difficult for party members to agree, with growing political polarization the likely culprit.

The takeaway? The president-elect has a relatively small, unpredictable effect on the markets. Other factors, like labor markets, economic trends and monetary policy also influence investment returns.

While an investment professional can provide valuable market insight, no one can see the future – especially in economics, where many factors coincide in complex, often-unpredictable ways. In this vein, it is also helpful to examine long-term, cumulative investment returns. Despite short-term dips, market value has steadily risen from Hoover’s presidency in 1930 to Joe Biden’s in 2023.

Based on this data, perhaps the single factor most responsible for investment growth is time. Those who did not divest due to pre-election anxiety typically gained more in the long run, even if they had to wait a few months. Remaining invested in a diversified, strategic portfolio is the name of the game.

With all this in mind, what does the optimal investment strategy look like? During election years, as always, that strategy depends on your personal risk tolerance and goals. But according to this data, one thing is true – the smartest strategy is almost always apolitical, takes the comprehensive financial landscape into account and is geared toward the long term.

Periods of change or uncertainty are great times to speak with your investment professional. Together, you can review your portfolio and make sure your investments are aligned with your risk tolerance and goals. It is good practice to assess your financial strategy regularly.

Steve Kim offers securities and investment advisory services through Gradient Securities, LLC. Member FINRA/SIPC. Gradient Securities, LLC offers investment advisory services under the d.b.a. of Gradient Wealth Management. Gradient Securities, LLC, and its advisers do not render tax, legal, or accounting advice. Brady Associates Asset Management is not affiliated with Gradient Securities, LLC.