With the dust settling from Tuesday’s presidential election, many investors are asking: What does a Donald Trump presidency mean for their portfolios? The initial post-election market surge indicates a clear risk-on appetite among investors, but is this behavior typical?
A Look at History
Since 1928, there have been five instances where the presidency switched from a Democrat to a Republican. Historically, these transitions have brought strong market performance in the short term. Median returns tend to peak at an impressive 6.1% in the 60 days following an election. Notably, George W. Bush in 2000 was the only exception, with a negative return in the two months post-election.
What Happens Next?
Despite strong starts, it’s not uncommon for performance to taper off after the first two months. Full-year returns following a Democrat-to-Republican transition have shown a median of -0.6%. This doesn’t imply that Republicans are bad for markets—both parties have seen robust performance over time. However, in the near-term, a significant portion of the gains tend to occur in the 60 days immediately following such elections.
