By Jack Ryan,
Enterprise-Journal
Two of the biggest arguments to re-elect President Trump are that he built a great economy during his first term, and that handing the government over to socialist-minded Democrats would ruin the country.
The economy indeed has done well since Trump became president. The stock market rose and unemployment was low — until the coronavirus hit. Markets have recovered, but unemployment remains at 10 percent, and if the president gets credit for the good news, he must also be blamed for the bad.
As for the Democrats, they do sound a little zanier than usual this year, what with Medicare-for-All and the Green New Deal. Voters are right to wonder what might be in store if Joe Biden wins the presidency and Democrats control both houses of Congress.
It’s difficult to look ahead with precision. If it was easy, we’d all be millionaires, right? But a look back at nearly a century of history reveals some very surprising trends about politics and the stock market.
Given the pro-business tilt of Republicans, you might think that markets perform best when the GOP holds political power. Wrong. You also might think that markets do better with Republican presidents. Also surprisingly wrong.
In July, McLean Asset Management compared the performance of the Standard & Poor’s 500 index from 1926 to 2019 with who was running Washington. The average annual return under Republican presidents was 9.12%. But it was 14.9% under Democratic presidents — a huge difference.
McLean then compared market returns with control of both the presidency and Congress. In the 47 years (34 Democrat, 13 Republican) that one party controlled both branches, the S&P 500 returned 14.5% annually.
With a Republican president and a Democratic Congress (33 years), returns slumped to an average of 7%. But returns were highest with a Democratic president and a Republican Congress: 16% annually during 14 years.
These are surprising differences. And a comparison of more recent presidencies continues to give the edge to Democrats, according to the website macrotrends.net.
President Trump obsessively disses the performance of his predecessor, Barack Obama. Through 43 months with Trump as president, the S&P 500 is up 54%, having recovered fully from the virus-induced recession. But the same index was up 70% for Obama’s first 43 months.
If Trump gets re-elected, he has a ways to go to match Obama’s and Bill Clinton’s ecords with the S&P 500.
During Obama’s eight years, the index was up 176%, and during Clinton’s two terms, it was up a whopping 211%.
The best two-term Republicans, Dwight Eisenhower and Ronald Reagan, each saw the index appreciate by about 130%.
Although these results are surprising, the statistics don’t really mean that one party is better or worse for the economy. But they do illustrate two important things that people should remember as the presidential campaign evolves from mean to meaner.
First is that, no matter how crazy American politics seems at times, the economy handles it and usually produces steady growth.
The Macronet website indicates that under 15 presidents going back to 1929, only three — George W. Bush, Richard Nixon and Herbert Hoover — were in office during periods when the S&P 500 declined. It rose for the other 12.
Second, while the people running Washington do have some influence over the economy and markets, they are not the ultimate deciders. Wars, recessions, terrorist attacks and viruses play a role. But mostly, the markets go up — and that should provide a little peace of mind for both Democratic and Republican voters.
