# Stock Market



## Ref (Jul 21, 2003)

I'm sure that there are opinions out there about how the stock market will react if either McCain or Obama wins.

Any ideas?


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## willythekid (Jan 21, 2008)

Forbes:
NEW YORK - Does the president affect your portfolio? Candidates would certainly like you to think that the answer is yes, and that the particular candidate doing the talking is better than the other guy.

Over the years, several studies have shown that the stock market has fared markedly better under Democrats than Republicans. (see: "The Presidential Portfolio") The difference, according to Pedro Santa-Clara and Rossen Valkanov, both professors at the University of California Los Angeles Anderson School of Business, is much too large to be random and cannot be explained by fluctuations in the business cycle. Nor can it be explained by higher interest rates in Republican administrations.

The UCLA professors looked at data going back to 1927. Our own study of the post-World War II presidencies confirms their results. We found that the S&P 500 has averaged a total return of 14.1% per year under Democratic presidents since April 1945, and 11.8% under Republicans. The best total returns--17.4% per year--were under Bill Clinton, whose presidency ranked first in economic results. (see: "Presidents And Prosperity") Gerald R. Ford ranks second, followed by Harry S. Truman.

Presidents And The Stock Market
President Term Economic Rank S&P 500 Start Of Term S&P 500 End Of Term S&P 500 Annualized Total Return (%) Stock Market Rank
Bill Clinton 1993-2001 1 433.37 1,342.54 17.4% 1
Gerald R. Ford August 1974-1977 5 86.02 102.97 17 2
Harry S. Truman April 1945-1953 7 13.64 26.57 15.6 3
Dwight D. Eisenhower 1953-1961 9 26.57 58.11 14.9 4
Ronald Reagan 1981-1989 4 131.65 286.63 14.4 5
George H. W. Bush 1989-1993 10 286.63 433.37 14.4 5
John F. Kennedy 1961- November1963 3 58.11 74.01 12.4 7
Jimmy Carter 1977-1981 6 102.97 131.65 11.2 8
Lyndon B. Johnson November 1963-1969 2 74.01 103.86 10.2 9
Richard M. Nixon 1969-August 1974 8 103.86 86.02 0.6 10
Source: Forbes statistics
However, no one, including Santa-Clara and Valkanov, seems to know why the market does better under Democrats. Another puzzle: There seems to be little correlation between economic performance and the market.

Under Ford, for example, the economy was middling but the market enjoyed a 17% total annualized return (share price gains coupled with reinvested dividends). This result may be a fluke as the market fared very poorly just before him under Richard M. Nixon (0.6% return) and continued at sub-par levels under Jimmy Carter. The Truman and Dwight D. Eisenhower economies were underwhelming, but the market averaged a total annual return of better than 15% during their years in office.

Clinton apart, the presidents who presided over strong economies did not enjoy particularly strong stock markets. Under Lyndon B Johnson, for instance, gross domestic product growth was at its height--but the S&P 500 results for LBJ were worse than for any postwar president except Nixon. John F. Kennedy was the third best president for the economy, but "his" stock market was below average. President George H.W. Bush presided over a sour economy but an average market.

Why the disconnect? Market economists say that investors don't particularly care about GDP or employment or even average personal income. Investors focus on corporate earnings, particularly projected earnings, and on interest rates. "Stock investors don't care about the economy. They care about earnings," says Richard DeKaser, chief economist at National City, a Cleveland-based financial holding company. DeKaser cites the so-called Alan Greenspan model for share price returns which holds that stock prices are a function of projected earnings discounted by rates on ten-year Treasury bills.

Other economists say there is a relationship between the economy and share prices, but it works in complicated ways. There may be a substantial lag time between economic gains and share price gains. On the other hand, share prices may rise in anticipation of better economic times rather than in reaction to actual prosperity. Share prices also may rise if investors' negative expectations in a given situation are not realized. Management consultant Peter Cohan says investors have poor expectations of Democrats, so once the Democrats are in power, stocks rise in relief "when it turns out they don't screw up the economy."

For that reason, some advise that investors temper their expectations. Says David Kelly, an economic adviser to Putnam Investments: "Bottom line, I think people should not let how they feel about politics affect how they feel about investing."


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## JustAnotherDog (Oct 16, 2005)

> Presidential elections and the stock market
> Vanguard, 10/23/2008
> 
> Every four years, some analysts attempt to forecast the potential implications of the outcome of the U.S. presidential election on the financial markets. Some even argue that U.S. stock returns have differed significantly depending on whether a Democratic or Republican president is in power. Possible reasons given include different ideological views of the two political parties on taxes, government spending, and other macroeconomic policies.
> ...


There is more with sources & charts at:

https://advisors.vanguard.com/VGApp...ntary/news/article?File=IWE_NewsPresElections


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## SiouxperDave25 (Oct 6, 2002)

http://www.edwardjones.com/ecmweb/group ... 043798.pdf


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