Politics. Need I say more.
So many people have such passionate feelings and ideas. Both Democrats and Republicans each have their diehard members. I on the other hand have looked and examined both these sides via the mainstream media and I just can’t ever seem to find any substance. Especially in this current race between Hillary Clinton and Donald Trump. I listen to both these candidates talk and I just think to myself…”So what’s the plan?” But you never hear it.
This frustration of mine has motivated me to offer up some “substance”. What I have done to add some insight is created a financial lens to compare the effects of the two political parties. Democrats vs Republicans. I have done research on some annual financial data concerning the US economy and arranged it in such away that allows us to compare how the economy does when a Republican is president vs a Democrat as President. This allows us to compare the two modern parties through a limited financial perspective with some clarity. Just a helpful tool to help with that notion and decision that is forced upon us as Americans; Are YOU a Democrat or Republican?
What Did I Research?
The stock market. What else?
Now I will be the first to admit that this is just a study of correlation and that the stock market and economy are influenced by countless variables. Also there is vastly more to judge a leader on than just how your S&P 500 index fund does in your 401 k. On the other hand, to say the research and comparison has no merit, would be an obvious lie.
I will present this comparative financial research in a variety of helpful ways. I will do so as unbiased as I know how. Truthfully, as I write these words, I don’t know how it will turn out or look like in the end. I have a hunch but nothing more. Also I think it’s worth noting that I have no idea who I am voting for in the upcoming election (though I hope to figure that out soon).
Let’s start by looking at the results and other interesting stuff, then we can discuss the data samples I took and why.
First let’s have a look at the raw data in the table Below.
S&P 500 Annual Returns with Corresponding President and Political Party
Here I have presented you with a simple year by year chart listing the annual returns of the S&P 500 with the corresponding political party and President for each year. From just a first glance I felt the Democrats were going to come out on top. This seemed most evident by the incredibly fruitful returns we enjoyed during the Clinton administration along with the scary results of George W Bush. I never thought that guy seemed that intelligent to tell you the truth.
We may as well get right down to it and take a look at the avg return of the Democrats vs Republicans.
Average Return of S&P 500 – Democrats vs Republicans
Democrats Killed It!!
Democrats clocked in at 14.07% avg annual return vs Republicans conservative (nicely put) 5.56% avg annual return.
Well it’s a bit of a slaughter. The Democrats are nearly three times the average return as the Republicans. 14.07% vs 5.56%. This data is taken from a sample over 36 years. No one has ever beat the stock market average over that period before. Except the Democrats. So there is really no rebuttal for the republicans. Statistically speaking.
Why Does the Stock Market Do Better With a Democrat?
We can only speculate of course but I believe there are two obvious factors involved. (Guys, this could be all BS – but I have to think of something)
- Government Spending
You have to spend money to make money. The Democrats LOVE spending money. They do. Their strategy has always been a hands on approach to government which costs money. Let’s just throw out some quick examples.
- The Obama loan modification program not only provides lender guidelines for the modification and entire mortgage work out process, but they also offer lender incentives! Thats right they give lenders $1,000 cash for each mortgage modification that meets the guidelines of the program, There have been millions of modification attempts.
- Obama Care. The US Government shells out tons of cash to subsidise policy costs for individuals under certain income levels. For example I know several people that pay between 100-200 dollars for health insurance that costs 400-500 dollars a month.
There are countless other examples where Democrats open up the US check book but let’s move on.
2) Lack of Regulation and Guidelines Creates Market Bubbles
I have a theory that the lack of regulation and oversight on big business leads to market Bubbles. There are a couple prime examples under George W Bush.
- The Tech Bubble was probably not Government fault directly but if there were some guidelines for investment banks in terms of looking at business models before offering equity to individual investors a lot of that mess probably could have been avoided.
- The Housing Bubble should have never happened. I just don’t see how wall street fell for that nonsense. The George W administration totally missed the boat on that one whereas the Obama administration did an amazing job fixing that mess. I honestly am so impressed with how he worked that situation. It was unfixable, but he fixed it. Good job Obama.
Just for fun I feel like we should list the individual president avg returns of the S&P 500.
S&P 500 Average Return by President
From Best to George…. I mean from Best to Worst
- Bill Clinton – 15.87 % annualized return
- George H W Bush – 12.86 % annualized return
- Barack Obama – 12.26 % annualized return
- Ronald Reagan – 9.89 % annualized return
- George W. Bush – -2.42 % annualized take
George SR. did pretty well along with the two Democrats. Regan was just fine as well, that is certainly respectable. But poor George W didn’t do so hot. Actually averaging a loss. Ouch.
Final Thoughts on S&P 500 Returns with Perspective to Democrats vs Republicans
No doubt this analysis is far from perfect. I am the first to admit that you should not decide on a political party on this finance blog study alone. However it would be just as silly to ignore it. This is close to 40 years of performance so the whole “coincidence” argument is out of the picture. There is a clear market winner here.
Truthfully I did not expect such a beating to take place. This was very interesting and surprising to me. Very unexpected.
Now that we have seen the results with check up on how and why I selected the data I did.
Understanding My Data Choices
I simply took the last 36 years of annual returns from the S&P 500 and matched it with the corresponding president and the affiliated political party. Below are more in depth explanations.
- Last 36 Years
I took the last 36 years because to me this is as far as you can stretch the modern day parties. I’m not a political expert but I do know that the parties evolve and mutate so that if you go back 70 years a republican looks more like today’s democrat. Also I’m partial to a 30 something data range because I’m 30 something.
- S&P 500
I chose the S&P 500 index because its one of the best known market indicators, right up there with the Dow Jones. I chose it over the DOW because it is on a broader and larger scale, and in my opinion, better represents the economy as a whole. Though I think the results would be the same with either index.
- Data Sample Flaws
These numbers are not perfect for several reasons.
First off, when a President is first sworn in the date is January 20th. That’s 20 days that should be on the previous president’s record for a study such as this. I honestly believe that discrepancy does not make a difference in the data and certainly not ones conclusion. It’s a minute discrepancy.
Another is that 2016 is not over with. Oh Well.
If I thought these oversights would make a lick of difference I would fix them. But trust me they don’t.