Democrat or Republican? The Stock Market’s Vote?
24 Nov 2017
With recent tweeting by President Trump we thought it would be an opportune time to look at how the
stock market has performed under different US Presidents.
One commonly held belief is that a Republican President should be considered bullish for the stock market while a Democrat is considered bearish. Below is a table of the performance of the stock market under different US Presidents since Hoover:
Popular opinion suggests that a Republican President is considered strong for the stock market. This however is not backed up by the raw data which suggests that monthly a Democratic President produces better stock market returns by nearly 3x. Again, the data can be crunched in any way that you like. We do feel sorry for George Bush Junior who undoubtedly inherited an internet bubble, had to work through September 11 and just when things were picking up he had to finish off his Presidency with the Global
Financial Crisis. Likewise, Hoover was the President during the Great Depression. We are not convinced that a different President would have had a different impact on the stock market in these situations (although Democrats will argue that Roosevelt had to deal with WW2). Remove these two Presidents and the Republican numbers improve to 0.97% per month, still materially below the Democrats.
The two most recent democratic Presidents, Obama and Clinton have had the two best stock market performances under their tenure. Under Clinton the market appreciated 211.3% or an average of 2.20% per month while under Obama the market appreciated 175.9% or 1.83% per month. Again, we believe that some context needs to be applied to these numbers. Clinton resided over the internet bubble, a unique period under stock market history that we believe would have happened under any President. While Obama resided on the period immediately after the financial crisis. A period that likely would have been profitable under any President.
While these numbers certainly challenge the notion that a Republican President is better for the stock market we believe that they mean little for most investors. It is always important to be aware of the wider political situation, but we believe that except for the extremes it has little impact on the overall markets. The wider market cycle will have a greater impact on the markets.