This year, it really seems as though the presidential candidates will have an effect on personal finances. Who you (in terms of economic bracket) will likely determine who is most likely to benefit you. But what about the stock market? I got an interesting press release from Savant Capital Management today that looks at Democrat presidents vs. Republican presidents in terms of stock market:
A common misconception is that the stock market performs better under a
Republican president. The Republicans’ more pro-business and
deregulatory policies are often thought to help stock returns, compared
to the Democrats’ willingness to regulate and tax more. Historically,
there is no evidence to support this theory. In fact, stocks have
actually performed better when a Democrat lived in the White House.
Since 1948, the S&P 500 Index gained 15.8 percent with a Democratic
president as compared to 11.2 percent under Republican leadership.
(The counterargument here is that the Democrats only appear to be ahead
– actually they are benefiting on a delayed basis from the preceding
Republican president’s pro-business policies.)
A major challenge with predicting how the market might react to one
candidate compared to another is that it simply gives too much credit
to a President’s ability to make a real difference in terms of the
No matter which theory you ascribe to in terms of presidents and the stock market, the bottom line is that the economic cycle goes on, and that the policies a presidential candidate puts into place can affect the economy overall — including its recovery from a downcycle.
But it is important to remember that downcycles are a natural part of the economy, and that trying to avoid them altogether is usually not a good idea. Runaway growth, aided and abetted by government policies (including deregulation) lead to an economy and a stock market that is more unstable, leading to bigger and bigger drops when the downcycle inevitably comes.
Who do you think is most likely to help an economic recovery in this country?