Navigating Markets During an Election: A Data-Driven Perspective for Doctors

As we approach the final stretch of the election, economic uncertainty is top of mind for many high-income earners, especially doctors. This market uncertainty coupled with potential tax rate hikes can add stress to an already demanding life. With headlines stirring emotions, it’s natural to wonder how the presidential election might impact your financial future.

Just like in medicine, some of the best decisions often come from relying on data, not emotions. In this article, we’ll cut through the noise and explore what history tells us about market trends during election years, so you can make confident, evidence-based decisions about your finances.

Are Election Years Bad for Markets?

While it’s a common worry that election years bring volatility to the market, the data actually suggests otherwise. Since 1926, the average annual return during election years has been approximately 11.5%, with the S&P posting positive returns 84% of the time. While non-election years performed slightly better, with an average return of 12.4%, only 70% of those years showed positive gains.

_{Source:  S&P 500 returns since 1926. Wikipedia Party Divisions since 1789.} 

What does this mean for doctors and their financial portfolios? The key takeaway is that election years are not inherently worse for market performance. Historical market data shows that investing during an election year should be guided by long-term strategy rather than short-term concerns.

What Do Elections Tell Us About the Market or Economy?

Surprisingly, elections themselves tell us very little about the market's future. Election campaigns often revolve around promises and rhetoric, rather than policies that immediately impact the economy. Additionally, historical data shows that markets have performed well under both major political parties in the U.S. 

The differences in market outcomes under "red" or "blue" administrations are less dramatic than often portrayed. What’s most important is that over the long term, markets tend to rise regardless of the party in power, since economic fundamentals — not election outcomes — are the key drivers of performance.

_{Source: Wikipedia Party Divisions since 1789. Return is average return of large cap US stocks since 1926. Trifecta defined as one party controlling the executive branch, House of Representatives and the Senate.}

What Does the Market Tell Us About Elections?

James Carville, campaign strategist for Bill Clinton, famously quoted “It's the economy, stupid.” Historical data shows he was right — the economic landscape during a sitting President's term frequently shapes their success. Since 1926, out of the 16 sitting presidents who ran for reelection, 10 avoided a recession during their last two years in office, and 9 of them were reelected. On the other hand, of the 6 presidents who sought reelection during a recession, only one was successful.

Interestingly, years when a sitting president runs for reelection tend to perform better in the markets than “open years” where neither candidate is an incumbent. Reelection years have historically outperformed open years by an average of 5.7%. 

_{Source: Wikipedia Party Divisions since 1789. Return is average return of large cap US stocks since 1926 Recession dates based on the National Bureau of Economic Research.} 

Prepare For Potential Tax Changes

While it’s important to understand each candidate’s proposed policies — particularly regarding income and capital gains tax —  it’s even more important to ensure your strategy focuses on long-term tax efficiency. 

High earning doctors should be prepared for potential tax increases. The good news, however, is that by implementing a tax-efficient strategy, you can offset this possibility and reduce your taxable income while positioning your portfolio for future growth. At Earned, we’re here to help you take proactive steps to make your money work harder, smarter, and more tax-efficiently.

The Bottom Line

With the presidential election in full swing, emotions are likely running high. It can be tempting to adjust your financial strategy based on the latest headlines, but it's essential to remain calm and stick to your long-term plan. Just as your work as a doctor requires thoughtful, measured decisions, so does managing your finances. The key to building and maintaining your financial wealth is sticking to a long-term, evidence-based strategy.

This is where we come in. Our comprehensive, tax-smart wealth-building services are designed exclusively for doctors and their practices. With our wealth and tax advisors all under one roof, we provide integrated, data-driven advice that can lead to better financial outcomes. With our support, you can feel more secure about your overall financial strategy — regardless of the election outcome in November.