No description has been generated for this video.
So we have this election year, and it's right here in front of us. And we all know that probably, but not certainly, the Republican nominee is Donald J. Trump, and probably, but not certainly, the Democratic nominee is Joe Biden. And in reality, at the age of these two men and of the things equal, something untoward could happen to them. And of course, that would be regrettable, regardless of whatever you think about them. But there's a couple of rules of thumb you can say. Generally, presidential election years have been pretty positive.
As I've often said, the fourth year, presidential election year, has been positive 83 percent of the total history of the S&P 500, with average returns of about 11 percent. The display in them typically is different when we have a Democratic president running than when we have a Republican president running. When we've had a Democratic president in the White House, the election year returns have been fairly steady through the course of the year. When we've had a Republican in the White House, they've tended to be lower early in the year and increase in the back part of the year. Why? Because people tend to think the Republican is more pro-business.
And if he's been in the White House and he's up against a, obviously, Democrat who might unseat him, there's a risk that you lose that. And in the early part of the year, people tend to fear that a lot. The reality, that fear doesn't translate quite so much with the Democrat, who people tend to think is not very pro-business, but more pro-big government, pro-regulation. The fact continues that election years tend to be pretty good, particularly election years where the midterm election year was bad. I've spoken about this before.
You may have heard this from me before, but if you take midterm election years, second year of a president's term, that have been negative, the subsequent fourth year has been positive every single time, going back to 1932. It's every single one. No exceptions. 15% average annual returns. The reality is that's kind of what's normal. Now, you never perfectly get what's normal.
And if you look at these two guys that are likely to be the nominee, neither one of them But the feature about those guys is in this election, more than any election in, well, maybe since 1892 when Grover Cleveland ran the second time, we know these two so well and so long that it's really hard to change our views of them very much. There's a lot of stuff going on out there, and none of it seems to change our views about them very much. And you know all the stuff that you read about in the newspaper, so I'm not going to go into that.
But the reality is none of that has changed people's views in a polling sense that have moved numbers very much. Just a little bit. Just a little bit. So let me go back to another point about this year. Is it possible that something moves that a lot? Yep. Is it possible that something untoward happens to one or both of these older men? Yep. That would be untoward. It would be unfortunate. But anything like that that creates real weirdness would drastically increase volatility. You follow the logical reason for that? If you take either one of these gentlemen and you have something untoward happen to him or have an help with both of them, that increases uncertainty.
And the uncertainty will make the market go volatile wild. That doesn't tell you necessarily that it doesn't end up the year with that same kind of number that I was talking about before. It just says you're likely to have extraordinarily more wild gyrations in the course of the year than you would normally expect with an incumbent Democrat running for re-election. So that's kind of my general overview of what I would expect relative to the election impact on the stock market. Of course, remember, that's only one aspect. It's a big aspect. It's a really important and powerful aspect.
But there's other things out there that impact markets as well, and we have to keep our eye on all of those. Thank you very much for listening. .