S&P 500 under Democratic and Republican Presidents
I hear so many things about how investors prefer a Republican president I often wonder if they have ever looked at the data. Of course from just looking at a chart of the S&;P 500 since WWII it is hard to see how the market has performed under different presidents.
Maybe this chart that shows the percent change under each president would make it a little clearer.
It shows that in the modern era the S&P 500 provided miserable returns under two administrations —
Nixon-Ford and Bush Jr.
But maybe the best way is to look at a table of this data. The table shows that since WW II the market increased 261.8 % under Republican presidents and 449.1% under Democratic presidents. But Republicans have held office for 36 years while Democrats have held the Presidency for 31.6 years — Truman was president for 7 years and 5 months while Obama still has 3 months to go to fill his first term. Taking the annual average to adjust for this, shows that the average annual returns under Republicans was 7.3% and under Democrats it was 14.2%, or almost double the rate of return under Republicans. If your well being depends heavily on stock returns, as most portfolio managers does, you are clearly better off now than you were four years ago.
To address possible objections to this analysis I could add Hoover and Roosevelt but that would just make the Democrats larger and reduce the Republicans average returns. The data is for the monthly average from the month they took office until the next president took office. I do not have daily prices back far enough to use daily prices and my data on total returns, including dividend reinvestment, only goes back to 1970. Truman took office after V-E Day and just before V-J Day, so his inauguration marks a very good way to date the start of the post WW II era.
This is one of the reasons why republicans are not interested in facts.
You’re exactly right, of course.
This has been well known – if not well publicized – for a long time.
This goes hand in hand with Mike’s Presimetrics work.
The hard facts are that by just about any metric you can think of, the country is better off with a Democrat at the helm.
It does leave one reeling at what might be required to educate even a small but influential subset of the populace to the data. CNBC talking heads come to mind. I can’t help thinking the first one to point this out would be banished from the green rooms forever…..
“It’s very difficult to get a man to understand something if his living depends on him not understanding it…” -Sinclair Lewis
What happens if you assume a one year lag?
There should be some lag, right? The previous administration’s policies continue to have effects for a while, no?
A one year lag might be OK for an economic variable.
But the market is a leading indicator and the lag would not be reasonable.
If anything, I would move the comparison up and make the base the market at the close on election day rather than the figuration.
Thanks, spencer! 🙂
Two factors that don’t seem to be reflected in these charts are inflation and dividends. Inflation has an obvious effect if you want real returns, and there has been a long term trend for dividends to be a smaller in proportion to price, which may effect one’s returns.
Where inflation was a major factor was in the poor performance of the market in the first few years of Truman’s term and the Nixon-Ford administration.
Academics tend to deflate the market and look at real returns and because it subtracts from both sides those comparisons tend to reduce the spread.
There is nothing inherently wrong with this approach, but there is nothing wrong with just looking
at the nominal returns either.
Out of curiosity I took the geometric averages. 🙂
For the Dems it was 9.9% per year, for the Reps it was 4.5% per year.
While we would expect the stock market to be a leading indicator, that expectation, when used to assess political leaders, requires that investors grasp the implications of political outcomes. Do we have any reason to believe that’s true?
In any case, I think Mike K gave the whole lagged business a try and found that it worked out just fine for Democrats. Working from memory, though, so I could easily be wrong.
There’s also that Campbell-Shiller thing that DeLong highlighted a few days ago, about which he suggested shifts in P/E ratios offer no real predictive value. Stock investors flatter themselves that they impound information about future earnings, but it simply may not be true. If not, then you’d expect a lagged response to changes in conditions, because it takes time for changes in conditions to change earnings.
I have a PE equation that makes the market PE a function of current rates and inflation.
It worked beautifully from 1958 to 1995.
I assumed that it was a measure of what was the present value of a perpetual stream of 7.5% earnings growth — the long term trend from WWII to the late 1990s. It did not work in the 1950s because there was still a widespread fear that the economy would return to a 1930s depression so investors were not expecting 7.5% long term earnings growth. The dividend yield was also higher than the risk free rate prior to 1958. In the 1990s bubble investors convinced themselves that
we would now see stronger than 7.5% earnings growth.
Currently, the equation says that the PE on trailing EPS should be about 20.
But the actual PE is about 15. I suspect that in a long term sluggish growth environment that investors are already discounting a much slower trend for EPS growth. But I’m not sure what it is so I do not have a good feel for what the PE should be.
This is very much what happened in Japan.
Post hoc ergo prompter hoc Einstein
The problem with such an analysis is that it leaves out soooo many variables, not the least of which is that each President takes office during, before or after multiple events. Take Bush II for instance. He took office almost immediately after the stock market bubble burst, causing a massive decline in stock prices, the likes of which we haven’t seen since the Great Depression. Was Bush to blame for the market crash? Or was it due to decisions made by Clinton? Or, more likely, was it due to the many factors that went into the creation of that bubble in the first place? To blame or credit Republican vs Democrat Presidents for what happens in the stock market during each presidential term is fraught with potential error. Perhaps the reason why this data has not been publicized more often is precisely because it is, as with many bits of data nowadays, biased and error-prone and, hence, not useful unless you are on one side or the other of the argument at hand. Good luck and don’t forget to vote!
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This Is by far one of the most unsound and biased left wingest looks at US market history I have ever seen.
Firstly, It is imperative to look at a year by year basis and apply a bar graph to the corresponding president. What you’ve done is credit Clinton with an aggregate S&P 500 % return over 67 years.
Damn I have so many problems with this, Lets start by getting the real skinny on both the S&P 500 since 1930, plus the DJIA since 1950. top % 10 years plus pres. in office and party.
S&P500 (1930-April 2012)
1. 46.6% FDR (1933), Democrat
2. 45.0% Eisenhower (1954), Republican
3. 41.4% FDR (1935) Democrat
4. 38.1% Eisenhower (1958) Republican
5. 34.1% Clinton (1995) Democrat
6. 31.5% Ford (1975) Republican
7. 31.0% Clinton (1997) Democrat
8. 30.7% Truman/FDR (1945) Democrat
9. 27.9% FDR (1936) Democrat
10.27.3% George H. Bush (1989) Republican
Dow Jones Industrial Average (1950-April 2012)
1. 1954, 44.0% Eisenhower, Republican
2. 1975, 38.3% Ford, Republican
3. 1958, 34.0% Eisenhower, Republican
4. 1995, 33.5% Clinton, Democrat
5. 1985, 27.7% Reagan, Republican
6. 1989, 27.0% George H. Bush, Republican
7. 1996, 26.0% Clinton, Democrat
8. 2003, 25.3% George W. Bush, Republican
9. 1999, 25.2% Clinton, Democrat
10.1997, 22.6% Clinton, Democrat
Looking at the Dow numbers,
1. No wonder Al Gore’s bitch ass wants to take credit for inventing the internet. Clinton, being the only Democrat on the list through 62 years of market activity, was in office 4 of the best 10 years. He can thank Larry Ellison, Bill Gates, Steve Wozniak and certainly and more importantly Steve Jobs for all of those dot.com gains.
2. FDR and Lyndon Johnson have created some of the absolute most absent minded social programs in history, running the well dry and forging higher debt. All of which for decades have produced minuscule to deficit results in terms of benefit. Furthermore if a fucking guy is in office for a dozen years one would fucking hope he could produce some type of economic relief. Especially during the immediate post great depression era years. But that alone doesn’t earn him rightful credit for in any market advances. If anything it hurt the potential for loftier gains possible had FDR not approved Glass-Steagle in 1933.
4. You say Ford was the worst ever second to Bush? Try 6th best in fucking history for Ford, and 8th best for Bush Jr.
All I can say is wow to your typical leftist spin that is out of proportionally fucking bogus and a menace to generation my age (20-25) who unlike I let the media pool wool over their eyes and they unquestionably oblige. Me, my eyes are wide the fuck open, you… either have cataracts or to get some lasik done with the quickness because your ignorance is downright cancerous.
And lastly Since 1953 Republicans have had a total % gain of 245.3%, while Democrats gained slightly less of 218%, thereby bringing the total of BOTH parties to 463.3% which is where I think you deemed it fancy to associate Democratic success with that of the entire United States successes over 60 years. Even then your number is still wrong.
To clarify the Glass- Steagle aspect, Case in point Clinton’s repealing of glass steagle, which democrats have for decades suggested the depression of 1929 was caused by the lacking of regulations FDR approved in 1933 under glass steagle. Even today some idiots propose its repeal caused the 2008 market collapse??? Don’t bother debating me on this you will not be able to win. The American Bankers Association, former President William J. Clinton, and others have argued that the GLBA permission for affiliations between securities and commercial banking firms “helped to mitigate” or “softened” the financial crisis by permitting bank holding companies to acquire troubled securities firms or such troubled firms to convert into bank holding companies.
Yo, Jenkins. How do your two lists of percentages, Presidents and a specific year clarify anything? Also,
you state, “Firstly, It is imperative to look at a year by year basis and apply a bar graph to the corresponding president.” Are you asking for a bar graph with notation of Presidents? Did you miss that in Spencer’s post? It comes immediately following the line graph of S&P 500 performance from ’45 to ’08. In other words, what are you trying to prove? At least Spencer is clear and to the point with good graphics.