Every election cycle, major business news, or economic downturn brings a wave of investor uncertainty. Lately, concerns have centered around a potential political regime change, Donald Trump’s influence, and the role of business leaders like Elon Musk. While these topics dominate financial media, they should not be the only driving force behind your investment strategy.
History tells us that the stock market is remarkably resilient across political shifts, economic changes, and global crises. Let’s break down how to approach market uncertainty with a data-driven, disciplined strategy.
1. Historical Market Data: What Happens Under Different Presidents?
One of the biggest investor fears is that a change in political leadership will derail the market. The reality? Over the past century, the U.S. stock market has thrived under both Republican and Democratic administrations. The returns of the S&P 500 are provided below, categorized by unified government (where the same party has controlled the presidency and both houses of Congress) and divided government.
S&P 500 Average Annual Returns (1926-2023):
Unified Democrat: 14.01%
Unified Republican: 14.52%
Divided with Democratic President: 16.63%
Divided with Republican President: 7.33%
But here’s the key insight: the long-term trajectory of the market is not determined by who sits in the White House. Factors like corporate earnings, interest rates, innovation, and consumer behavior play a far greater role than election results.
Consider these historical examples:
Barack Obama (2009-2017): The market surged 191% over his eight years despite fears about government regulations. [Source]
Donald Trump (2017-2021): The S&P 500 rose 80% despite trade wars and political turmoil. [Source]
Joe Biden (2021-2024): The market initially struggled with inflation but rebounded strongly in 2023 and beyond, providing a total return of 65%. [Source]
The takeaway? Presidents don’t control the market nearly as much as people assume.
2. The Psychological Impact of Market Uncertainty
Even if you understand the data, that doesn’t mean market volatility feels comfortable. Psychological biases can make uncertainty feel overwhelming.
Recency Bias: Investors assume that recent trends will continue indefinitely (e.g., “The market is down, so it will keep going down”).
Loss Aversion: Studies show people feel the pain of losses twice as strongly as they feel joy from gains. This often leads to selling low and missing recoveries.
Confirmation Bias: We naturally seek information that supports our fears (e.g., watching only negative financial news).
Solution: A Disciplined Approach
Re-evaluate your goals. Have they changed? If not, it's likely not the time to change your portfolio. Morgan Housel said it best in his podcast from February 21st, 2025:
Danger and uncertainty feels awful, so it's comforting to have strong opinions—even when you have no idea what you're talking about—because uncertainty feels reckless when the stakes are high. You see this most often during a recession, a bear market, or a crisis like the COVID-19 pandemic, when there are no clear answers and nobody truly knows what will happen next. Ironically, that's when people make their boldest predictions, saying, "I know what's going to happen next. This is what will happen. Here's what you need to do." But in reality, that is the worst time to trust such advice—or to make those claims yourself. - Morgan Housel
3. Stress-Test Your Financial Plan: What Happens in a Downturn?
Rather than worrying about worst-case scenarios, prepare for them mathematically.
Ask yourself:
If my portfolio dropped 20%, would my financial goals still be on track?
Do I have 1-2 years’ worth of living expenses in cash or stable investments?
Am I diversified across different asset classes (US stocks, international stocks, bonds, cash, etc.)?
A well-structured financial plan accounts for downturns before they happen. Does that mean that it will cure one's anxiety? No. However, it will help provide some context into one's potential decision-making processes.
4. Understanding Risk vs. Return: How Much Do You Actually Need?
Many investors take on unnecessary risk because they focus on maximizing returns instead of meeting their actual financial needs. Ask yourself:
How much return do I need to meet my goals?
At what point have I “won the game”?
Taking additional risks may be unnecessary if you already know the required rate of return needed to meet your goals. If you put your dollars into risky situations just for the potential opportunity to tell your friends you hit a home run (since we never heard about the losing investments), what's the point?
Instead, put your dollars in position to meet your goals.
Purpose, Plan, Portfolio. NOT the other way around.
5. "This Time Is Different" - The Myth That Keeps Investors Up at Night
Every market downturn, every political shift, and every economic crisis comes with the same phrase: “This time is different.”
And to be fair, every situation is unique in its details. Today’s concerns—whether it’s a divisive election, interest rates, artificial intelligence, or high-profile business leaders like Elon Musk—may feel unprecedented.
But the reality? Markets have always faced uncertainty.
Here are some moments when investors were convinced the world was different, and the market would never recover:
2008 Financial Crisis – People feared the banking system would collapse. The S&P 500 fell nearly 57%, but it fully recovered and went on to hit all-time highs.
2000 Dot-Com Crash – Tech stocks imploded, and many assumed the market wouldn’t rebound for decades. Yet, innovation continued, and today’s biggest companies (Amazon, Google, Microsoft) flourished.
1970s Stagflation – High inflation, soaring interest rates, and geopolitical turmoil made the market look bleak. But by the 1980s, a historic bull market had begun.
Great Depression & World War II – If there were ever a time to believe markets wouldn’t recover, this was it. Yet, long-term investors who stayed in the market were eventually rewarded.
So, is this time different? Yes, in its specifics. But no, in the broader sense. The market is designed to adapt, businesses adjust, and innovation continues. The stock market's long-term trend is upward—not because things don’t change, but because they always do.
The lesson: Don’t let emotions trick you into believing all of the “good sounding” reasons to sell. There will always be uncertainty, and their likely isn’t a time when the “dust settles.”
Long-term investors who stay disciplined through “unprecedented” times historically come out ahead.
Final Thoughts: What You Should (and Shouldn’t) Do Right Now
What NOT to Do:
❌ Panic-sell based on headlines
❌ Assume a political shift will ruin the market
❌ Overload your portfolio with speculative investments
What TO Do:
✅ Maintain a long-term perspective
✅ Diversify your investments
✅ Stress-test your plan for downturns
✅ Focus on your financial goals, not market noise
Political uncertainty will always exist, but disciplined investing remains the best path to long-term success. The market rewards patience, not panic. Stick to your strategy, and let history be your guide.