The reader may be of my Party, or of the other Party, but it is worth noting here that when it comes to one’s own money, one is correctly cautioned to keep political and other passions hard at bay and ask simply: who reliably delivers more cash to me?
To aid us as we are thinking on that question, we are most grateful to young Marc Lichtenfeld, Investment University Senior Analyst, for providing us the following charts and analysis of how the equity markets have performed, during the Presidential terms of the two principal political Parties over a span of 100 plus years, making allowances for variables of importance such as the Party control of Congress and the like.
I proceed now to quote, liberally, young Marc Lichtenfeld and I thank him for his note and most useful information:
I looked at the performance of the Dow Jones Industrial Average starting at the beginning of every presidential administration, going back to 1901. The S&P 500 data began in 1929 (including a proxy for the index before it actually started in 1957).
I also broke it down further to see what effect having a Congress that was the same or opposition party would have on the results.
Lastly, I wanted to get a sense of the long-term impact of the administration’s policies. A President’s actions don’t only impact the economy from inauguration day to inauguration day. They can have a long-lasting effect.
For example, some say President Clinton is the recipient of the good fortune that was a result of President Reagan’s policies. The argument can also be made that President Obama is suffering through the malaise caused by President George W. Bush’s mistakes.
The first table shows the performance of the Dow and S&P 500 with a Republican or Democrat President. There were 15 Republican terms and 13 Democrat.
|Dow Jones Industrial Avg.|
According to the numbers, when it comes to the Dow Jones Industrials, Democrats appear to be better for the market in the short term, while Republicans are in the intermediate term. Long term however, the results were identical.
In the broader S&P, however, the market performed way better under a Democrat President across all time periods studied.
Now, let’s take a look at how Congress impacted the results.
|Rep. Pres. w/ Rep. Congress||Dem Pres. w/ Dem. Congress||Rep. Pres. w/ Dem. Congress||Dem. Pres. w/ Rep. Congress||Rep. Pres. w/ Split Congress||Dem. Pres. w/ Split Congress|
A couple of notes:
The sample sizes of a split Congress (meaning the House and the Senate were controlled by different parties), were very small. Only Ronald Reagan’s two terms in office for the Republicans and Woodrow Wilson’s second term for the Democrats.
For the Dow, Reagan’s two terms blew all other combinations away across every time period except five-year performance. When you add the S&P 500, Reagan’s five- and 10-year performance was best, but shorter term, investors did better with a Democrat in the Oval Office and Republicans in control of Congress.
If you eliminate Reagan’s term so that only larger sample sizes are used, a Democrat President with Republican Congress had the best one-, three- and five-year performance in the Dow. The 10-year champion was a Republican President and Democrat controlled Congress.
For the broader S&P 500, the market climbed much higher when a Democrat was in the White House. Short- and intermediate-term performance was enhanced when the Democrat President had an opposition Congress.
But perhaps the most surprising results were that long-term performance was much stronger when the Democrats were firmly in control of the government, returning 253.69% over 10 years or an average annual return of 13.57%.
The perception is that Republicans are more pro-business. I think their policies and plans back that up. But at least as far as the market is concerned, over 100 years of results suggest you’ll make more money on your stock investments with a Democrat in the Oval Office.
How much of it you’ll get to keep is another story due to differing tax proposals.
Lots of factors go into who Americans select as their President. Foreign policy, tax policy, social issues, etc. The stock market is usually not a big consideration. If it was, George W. Bush wouldn’t have had a prayer against Al Gore, as the market more than doubled under Clinton’s last term. And Mitt Romney would be the Republican equivalent of Walter Mondale after President Obama’s 69.6% bull market.
I here cease to quote from young Lichtenfeld and again thank him for his very useful seasonal note to us.
It seems to me that young Lichtenfeld‘s message very much mirrors my own: buy and hold good quality stocks!!!! And this message is likewise redolent of my aged uncle’s long ago admonition to me: “Little Giovanni, the most important thing in life is not money. The most important thing in life is MY MONEY!!”