Investor Strategies,

Better For Business: Democrats or Republicans?

Bound to be controversial, a recent analysis of American stock market returns demonstrates that the market performs better under Democratic than Republican presidents. Here's the video taking you through the chart. We've written out the transcript below, as well:

Transcript:

Wall St. has identified with the Republican party, but surprisingly Democratic administrations butter its bread. The crash in '29 under Hoover devastated shares. There was a huge recovery under FDR, but then the second World War arrived. In the 50s the markets liked Ike. The 60s saw share prices and hemlines rise under JFK and LBJ, but the 70s stagflation and oil shocks led to dismal returns under Nixon, Ford, and Carter. By Reagan's 2nd term it was morning in the stock market, yet most of the gains happened under Bill Clinton. The Dot-Com crash at the start of George W. Bush's term and the financial crisis at the end walloped shares. Under Obama the markets recovered. The result: when Democrats have been in the White House, nominal share prices increased 460% compared with only 100% under Republican presidents. But in real terms, the difference is starker. Democratic administrations produced 300% cumulative returns. The Republicans accounted for nil.

 Does It Matter?

A recent article from The Atlantic points out that despite whatever side of the political fence you're on, you can—like most statistical data in an election year—splice the data however you'd like:
If you were a GOP homer [...], you could correctly point out that until the 1990s, Republican and Democrat administrations oversaw the same number of terms with positive stock market growth. (Nice job, everybody!) Meanwhile, Democrats could point out that the last time we elected a Republican president who would preside over positive stock market performance, it was the 1980s.
Conversely, Joshua Green from Bloomberg offers another point of view by sharing a comparison made originally by Bob Drummond that focuses on hypothetical investment returns:
As Drummond shows, $1,000 invested in a hypothetical S&P 500 tracking fund beginning when JFK was president and measured only during subsequent Democratic presidencies would have yielded $10,920 by the time the market closed yesterday. Alternatively, $1,000 invested when Richard Nixon was president and measured only during Republican presidencies would have yielded $2,087 on the last day of George W. Bush’s presidency.
A question for you, dear readers: what do you think accounts for this correlation? Do you think Democratic administrations are "better" for the market? Or is more context needed here?
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2 Comments

Which Presidents Were Best For The Economy? | The @SprinkleBit Investing Blog

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[…] But rather than a way to place undue blame or praise on particular presidents, we think each president should indicate a time period in history and each subsequent loss or gain should be placed in context. A similar statement could made about a earlier post on whether democrats or republicans are better for the markets. […]

Mikael Elmér

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Interesting blog post. Thanks for sharing!

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