More people have forwarded me the below graphic than any news item in recent memory. That’s kind of interesting, because I don’t find it a compelling or remotely persuasive argument. Perhaps my critique of Charlie Gasparino’s Obama Panic article led some people to think I was choosing sides. (I guess I was — I chose logical analysis over partisanship).

Here’s the issue:

"Since 1929, Republicans and Democrats have each controlled the
presidency for nearly 40 years. So which party has been better for
American pocketbooks and capitalism as a whole? Well, here’s an
experiment: imagine that during these years you had to invest
exclusively under either Democratic or Republican administrations. How
would you have fared?

As of Friday, a $10,000 investment in the S.& P. stock market
index* would have grown to $11,733 if invested under Republican
presidents only, although that would be $51,211 if we exclude Herbert
Hoover’s presidency during the Great Depression. Invested under
Democratic presidents only, $10,000 would have grown to $300,671 at a
compound rate of 8.9 percent over nearly 40 years."

That seems like a compelling argument. Except that off the top of my head, I can spot a dozen significant logic errors. Let’s take a closer look at a few:

First off, we are looking at 13 Presidents — 6 Democrats, and 7 Republicans. That is simply too small a sample size to draw a valid conclusion. Mark your calendars to defrost yourselves around November 4, 2804, when we have a larger sample size to play with.

Second, this takes a very complex system consisting of markets, economics and politics, plus their interaction, and reduces them all to a single variable: President’s party. As we have discussed in the past, that is an error. Controlling for a single variable when dealing with complex systems rarely yields insightful data.

Third, this looks to me like yet another case of *confusing correlation with causation. Simply because a given party is in office does not mean it is causing the markets to perform better or worse. To prove that was the case, you would need to show a causative link — that one party did x, y and z, while the other did a, b, and c — and that led to an X% outperformance. I have yet to see that proof offered by anyone.

The mere fact that one party is in the White House doesn’t mean all that much to the markets.

Finally, let’s take a snarky look at the past few Presidents, and see if we can’t figure out the secret to their performance numbers. My best guess is good (or bad) timing:

Bush II: Came into office after 18 year bull market and crash; Arrived after major deregulation (Glass Steagel, Commodities Futures Modernization act) were already fait accomplis, contributing mightily to the credit crisis

Clinton: Arrived post recession, mid 82-00 bull market. Greenspan Put came about in 1997. Got out before most of the wreckage took place.

Bush I: Bad timing everywhere: Recession was ending during re-election campaign, but not yet felt by election data yet. Mistimed the war, patriotic fervor was cooling before re-election. 

Reagan: Came into office at the tail end of a 16 year Bear market.

Carter: Arrived post Vietnam, Post Watergate. Malaise. Inflation, oil crisis were rampant.

That smells too much like dumb luck to me.


UPDATE: October 16, 2008 9:18pm

Greg Mankiw addresses the same issue from a different perspective, and reaches the same conclusion.

Hey Prof — please tell me you aren’t still drinking that efficient market hypothesis Kool-Aid, are you? (You seem like an otherwise intelligent fellow!)


Correlation and Causation   Let’s more precisely define our terms: Correlation is the occurence of two (or more) elements, usually in the same time, location or event. They may be independent (or not), they might be coincidental  (or not). Correlated items can have no relationship other than their simultaneous occurence. Causation, on the other hand, refers to a specific relationship — one of authorship and creation. X caused Y to occur is a relationship of causality.


Single vs. Multiple Variable Analysis in Market Forecasts (May 04, 2005)

What Investors Need to Know About Historical Data  (02/01/08)

Confusing Cause & Effect: Elections and Markets (January 09, 2008)



chart via NYT

Category: Data Analysis, Politics

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

61 Responses to “Market Performance by Party? (No)”

  1. Jonathan says:

    I buy = market falls
    I sell = market gains

    Problem Solved

  2. CNBC Sucks says:

    As a registered Republican, I will have to take exception with your use of logic and facts, Barry. Genius Joe Kernen ( demonizes Obama on a daily basis, and if a man badmouths another man enough times, what he is saying must be true. Indeed, the fact that Kernen, Larry Kudlow, Michelle Caruso-Cabrera, Charlie Gasparino, Don Luskin, that Ewok fellow, and the Fuckface Trader with the GOP ID tag are all Republicans and are all on TV, while there is only one Barry Ritholtz, should make all of us question your judgment and patriotism. I submit that returns for US equities will be fine when President McCain names Charles Keating the Secretary of the Treasury and Mr. Keating’s family relation Joe the Plumber the Secretary of the Interior.

  3. If you invested $10,000 from 1929, through Dems and Reps, you’d have about $10 million.

  4. CNBC Sucks says:

    Sorry for the double post, but I absolutely cannot believe I left out Dennis Kneale.

    And to more seriously answer your question, I never associated market performance with the party in power because we Republicans always make the stock market tank.

  5. Wisdom Seeker says:

    Excellent debunking.

    These sorts of arguments say far more about those promulgating them, than they do about whom to vote for.

    And what these arguments say about the promulgators is not flattering.

    “Too big to fail. When does the middle class get this status? ”

    It seems that to get that status, one only needs to stand up and demand it. At least, that works for the other TBTF players.

    When will the middle class get its act together politically?

    Oh whoops: We’ve been arbitrarily divided by PTB (via the media) into Red team and Blue team, and each side is fed whatever propaganda keeps it happy (and opposed to the other side). Even when in reality both sides have far more to gain by working together and compromising.

    That way, we can have the perpetual political “sport” running 24/7 (or is it a perpetual “war”), and the masses are entertained without threatening those pulling the strings behind the scenes…

    The reason why the bailout was crammed down so fast was that somebody noticed that ALL the phone calls to congress were in opposition. Can’t let that go on for very long; people might start to work together!

    So, back to divide-and-conquer…

  6. Jay Weinstein says:

    BR- Thank you for having some understanding of basic statistics, something that 99% of Wall Street and 100% of CNBC loudmouths appear to be lacking.

    Promise me this: The next time some idiot mentions the Presidential cycle and stock returns, or the Super Bowl Indicator, or some another asinine theory, please write a similar post pointing out how stupid they are.

    Thanks in advance!!

    BTW, You should put the book “Innumeracy” on your suggested reading list.


  7. Chief Tomahawk says:

    BR, I assume they’re talking about from when one takes the Oath of Office forwards; I suspect by that time shareholders would’ve taken preemptive action with regard to the stated policy aims of an individual. For example, if a Dem were elected and pledged to raise cap gains where the Repub. in office up til then had cut them, I would imagine selling would take place between November and January, that is if there are any cap gains to be had… Adjusting the cited info above from the elction date instead of inauguration date could change the data.

  8. jr says:

    Besides, the platforms have changed dramatically.

    Can you really claim that the ’29 racist southern-dominated Democrats resemble the ’08 Dems?

    Or that the protectionist ’29 Republicans represent the ’08 Chicago-school-of-economics Republicans?

  9. TG Randini says:

    Okay, I’ve picked on Palin long enough. Three more weeks and she becomes another Hootie and the Blowfish. Bye bye Sarah. You’re not nearly as bright or fun as Tina Fey.

    But what’s with this McCain guy? He looked like he was about ninety years old on those closeups last night… and a CRAZY eighty.

    You know… a crotchety kind of ninety where he screams at the nurse in the dementia ward, yelling for the nuke button.

    Scary guy.

    After election day, when he has nothing to do, let’s see if he hangs out with his constituency: farmers, ranchers, hillbillies and fascists.

    Trading update…
    No longer shorting the Baltic Dry.
    Long: poppyseed dressing.

  10. James says:

    That seems like a compelling argument. Except that off the top of my head, I can spot a dozen significant logic errors.


    For one thing, inflation during the periods is not factored in. Nor home appreciation, tax rates, etc. A more interesting measure might be household net worth, factored for inflation. Even then there are a variety of other issues/factors that would come to mind as you really begin scratching at this.

  11. ambivalentmaybe says:

    have you read Unequal Democracy by Larry Bartels? He’s looking at income inequality, not the stock market, but he concludes:

    “Over the past six decades, the real incomes of middle-class families have increased twice as fast under Democratic presidents as they have under Republican presidents. The real incomes of working poor families have increased six times as fast under Democratic presidents as they have under Republican presidents. These differences are not attributable to long-term demographic or social trends, economic shocks such as oil crises, or other confounding factors.”

    So, whether or not you should base your stock picks on that, there is some good evidence that overall economic performance for the majority of Americans is better under Democratic presidents than under Republicans.

  12. odograph says:

    I think it is correlation, rather than causation. But I think the real causation still says we shouldn’t fear Democratic Presidents.

    (I think the mechanism is that people vote Republican in already-good times, and flip to Democrats when the party is over. Buying in with a new Democratic President is perhaps statistically, buying in the valley.)

  13. Tuck says:

    Barry you’re pretty good at critical analysis when you actually engage in it. Pity some of your other posts haven’t benefited from the same detachment that this one did.


    BR: I bring the same approach to all of my analyses — you just happen to agree with this conclusion, and disagree with others.

    I can assure you the methodology is identical . . .

  14. Odograph,

    Do I understand your idea correctly? One party accelerates business (and inflation), supply side style, leading to a market top and eventual bear market. The other party creates a Keynesian stimulus afterwards, leading upwards from the valley?

    That’s a credible attempt at a thesis as to the basis of this outperformance (beyond randomness) — whether its true is another story, but its an idea. Now you have to prove it mathematically.

    Who wants to do the heavy statistical lifting and show the one party creates booms and tops and the other party comes in after crashes and lows?

    (Assuming you can show that . . . )

  15. Blueoysterjoe says:

    I think you are right. In a perfect world, we would need a _LOT_ more evidence to make a determination about which party is better than the other on the economy.

    Here’s the rub: I need to figure out by November 2008 who I am going to vote for.

    The two parties have different philosophies about matters both directly and indirectly related to the economy, from views on regulation to views on social security and welfare.

    As a citizen, I need to try and figure out who is right as best I can.

    Maybe it’s true that the Democrats have had a lot of “dumb luck”. And it’s definitely true that correlation does not _necessarily_ mean causation, although it doesn’t exclude it either.

    Just because we can’t find the causation doesn’t mean that it isn’t there either. Just because we do not have the tools to determine if “dumb luck” is actual dumb luck or actual causation, doesn’t absolve me of the responsibility of having to choose who I think will best manage the economy, within his limited but not insignificant means to do so.

    So if I have to make a political decision based on imperfect data, I can either just shrug, pat myself on the back and say, “until I have perfect data, I will remain pure, boyo”, or I can make the best judgment I can make with the limited resources I have. I mean, that is what we do everyday in the markets, right?

    You certainly have the right to wait for your perfect proof, but I do plan on voting a few more times before 2084 and I will do it with the evidence in hand.

  16. odograph says:

    Thanks for the reply Barry, actually I was thinking of business cycles happening largely independent of Presidential action, but that the Presidents were chosen … as a trailing indicator?

  17. Independent Voter says:

    I never vote for a candidate or party, I only vote against the= guys who screw up.

    This year, the clusterfuck partty is the GOP — I will vote independent, Ron Paul, Democrat but I will not pull the level for any Republican candidate. This is a throw the bums out election.

    If its GOP, its dead to me.

  18. odograph says:

    Shorter: if Democrats tend to get elected when markets are already F’d up, that might be a fairly good time to buy.

  19. Kaleberg says:

    I agree. Correlation is not causation. On the other hand, correlations can be useful. Did you know that the height of the tide correlates with the position of the moon? You don’t have to be Sir Isaac Newton to use this correlation to figure out when to take your ship out of harbor. You can do this even without experimental verification of the Higgs particle.

    I am willing to believe that there is some other funny number stuff in there, but the apparent returns on a politically based investment strategy look good. Sell the S&P when a Republican becomes president, buy when a Democrat inaugurates. Yes, you would have missed out on the Reagan boom, but you’d still be way ahead.

    When Newton proposed gravitational action at a distance as part of his explanation for tides, he could get good working answers. His theory was a good working hypothesis. The fact that there is no such thing as Newtonian action at a distance was irrelevant. Einstein proposed space curvature as an explanation, and the tides budged not a jot. The quantum gravity people argue about symmetries and strings, but we can still use our old tide tables just fine.

    Darwin didn’t propose evolution. Others had beaten him to this. He did propose that it was driven by natural selection based on reproductive success. It took a fair while before the new synthesis which tied evolution to genes, and even more time before evolution was tied to DNA, and it looks like there is more going on than just DNA expression, what with gene silencing and the like. That there was some primate knuckle schlepping around the savanna or from tree to tree ten million years ago who has an descendant on the New York Stock Exchange is still true.

    Don’t dismiss a good investment strategy because you don’t understand how it works, or don’t like the ideological taint of its explanation.

  20. AGG says:

    Barry, you are right of course. However this goes way beyond correlation versus causation. Anyone who defines successfull investing as buying an index is beyond pity. Any serious inquiry would show the various successfull efforts on the part of our betters to ensconce presidents and other politicians in office for the sole purpose of gaming the tax code and obtain government funding for research so that private firms can use the results to profit in the “free market”. What a crock!

  21. odograph says:

    I think Mankiw took this in the direction of hand-waving. From my reading of his post, his argument was that if there is not tight causation then there was nothing to be seen here, move along …

    It might be an interesting question with what degree of competence Republicans manage the end of business cycles, and with what degree of competence Democrats manage the slumps.

  22. wazzup says:

    Generally agree with your analysis, it’s about timing. At the same time a prez can contribute significantly to the downturn including preventing the downturn. How was Paulsen (appointed by Bush_, the inside man, unable to detect the financial crisis? Maybe a less bad measurment would be the average annual budget deficit especially for 8 year term. Here Bush II had the budget handed to him on a silver platter, only to fukk things up. I can only hope that the US gov will follow how Sweden deal with the financial crisis in early 90′s and especially the post crisis financial budgets. In 1993 the budget deficit was 12% of GDP. The public debt had doubled in three years predominantly due to the crisis. Budget was balanced by 1999 (increased taxes + tight spending control) and still is balanced. National budget deficit has fallen to 31% of GDP (projected 2008)

  23. Phil Spector of Deflation says:

    “Or that the protectionist ’29 Republicans represent the ’08 Chicago-school-of-economics Republicans?”

    That’s 1994 Chicago-school-of-economics Republicans and 2008 Mussolini-style central planning Republicans?”

  24. Steve Barry says:

    If you really wanted to do this fairly, attach the first year of a presidency to the previous party and also factor in who controlled Congress. For example, you can’t blame W for the market crash that started in 2001…he wasn’t there long enough. You also cannot blame Obama for the first year at least if he gets elected.

  25. ptgerber says:

    Good post Barry. I can’t stand these intellectually lazy types who observe: “Tuesday follows Monday, good heavens it follows that Monday caused Tuesday”. I can’t wait till they discover Wednesday, it’s gonna rock their world, maybe could be a book contract, or their own TV show in it.

  26. Robert says:

    I totally agree. First, the letter before your name doesn’t control your policies. Secondly, world events affect the stock market. Think about 9/11 or the fall of communism in 1989 resulting in a paradigm shift of countries towards capitalism. Finally, and most important in my mind is the power relationship between the president and congress. In the 1980s Reagan used his popularity to bully the congress and get most of his plan in. In the 1990s the most conservative congress in decades was able to do the same for about 5 years. I challenge people to look at the DOW in the 90s. On 1/10/93 when Clinton was inaugurated the market stood at 3241. On 11/08/1994 when the Republicans won it was 3830. A gain of 18 percent. Two years from that date it was 6219. A gain of 62 percent. Two years later it was 8730. A gain of 43 percent. Two years from that date Newt was run off, the Contract with America was dead, conservative idealogues gave way to entrenched pragmatists in the congress and White House and the DOW was done for years..

  27. Jonny says:

    Steve is absolutely correct.

  28. billy says:

    The only problem is, you’re analysing and debunking the wrong myth. Please apply the same approach to the tedious drivel we hear every single day from even the apparently rational, the drivel that pushes the line that repugs are the better party for the conomy. McCain tells us that Repugs lower taxes and spending and Dems raise them. He tells us that repug administrations are better for the economy, and most people believe it!

  29. VJ says:


    I buy = market falls
    I sell = market gains

    You need to adopt the George Costanza method. Whatever you think is the absolute right move, do the opposite.

  30. George Costanza says:

    I take offense to that…

  31. Sus Ano says:

    Or maybe Henry Ford was right. Maybe paying your workers enough to buy your products is what makes a successful company and a successful economy.

    As the link Gary provides above highlights there is a big difference in income inequity depending on who is in power. Tax codes, social safety nets, government on services that help citizens – those are all things that presidents (and the House and Senate) DO have a direct influence on. Yes it’s a small sample size but isn’t part of the current argument against Obama (and most democrats) that they want to redistribute income? Of course different parties took power at different times and under different economic times. But Ds and Rs have generally had very different policies on economic distribution. Maybe this is nothing more complicated than high levels of income inequity cause economic damage over time.

    After all just ask yourself – what would the US economy be like now if instead of the past few years having the same level of income inequity that was seen at the time of the great depression it had been more equally shared? What if instead of 25% of income going to the top few percent, it had only been 10% of income? Can you honestly argue that having less debt across the country would be bad? What if China didn’t have partial economic control of the US? What if the 16% of homeowners underwater could actually afford their homes? What if less credit actually had very little effect because people didn’t owe anywhere near as much?

  32. Tom K says:

    > Over the past six decades, the real incomes of middle-class families have increased twice as fast under Democratic presidents as they have under Republican presidents.

    So? Over the past five decades, Michael Jordan won more NBA championships than me, Brad Pitt is better looking than me, Warren Buffet is richer than me, and Steven Hawking is smarter than me. I guess the Republican presidents were behind it.

    > Here Bush II had the budget handed to him on a silver platter, only to fukk things up.

    Silver platter? SILVER PLATTER?? Ummm, did you ever hear of the TECH BUBBLE OF 2000? Irrational Exhuberance? Sky high valuations? 9/11??? Geez, pick up a history book!

    Go ahead people, vote Barack Obama in as your commander in chief. From each according to his ability to each according to their needs. Let’s spread the wealth around…it’s the neighborly thing to do. Don’t worry, government is the engine of job creation.

  33. Steve Roth says:

    “First off, we are looking at 13 Presidents — 6 Democrats, and 7 Republicans. That is simply too small a sample size to draw a valid conclusion.”

    True, but it’s all we’ve got. Since we can’t rerun history, the best data we have is long-term comparisons of (fairly) consistently different economic theories in application.

    “this takes a very complex system consisting of markets, economics and politics, plus their interaction, and reduces them all to a single variable”

    Absolutely correct. This correlation is probably the least convincing. But there are about a dozen others, and they all say the same thing:

    >confusing correlation with causation.

    See “can’t rerun history,” above. While all this empirical data may not prove the virtue of Democratic policies, it proves quite incontrovertibly that certain theories scribbled on napkins, and their proponents, are loony.

    There is a whole ream of theory explaining why Democratic policies would result in greater prosperity.

    But this ain’t Newtonian physics we’re doing here. Absolute certain causation, in macroeconomics, has proved deucedly difficult to demonstrate.

    One thing we can say for sure, though: in prosperous, developed economies taxing between 28 and 50% of GDP, there is no correlation between government size and growth.

    It’s a myth.

    “The mere fact that one party is in the White House doesn’t mean all that much to the markets.”

    Absolutely true. Or at least the lag is uncertain and uncertainly variable. But it means a hell of a lot to the economy. (No Reaganomocist would argue that Reagan had no effect on the economy…)

    “Finally, let’s take a snarky look at the past few Presidents, and see if we can’t figure out the secret to their performance numbers.”

    Snarky, yes. Translation: cherry picking, the kind of stuff you see all the time–short term, specific statistics, useless.

    That long-term data is the best we have to compare the two parties’ theories, approaches, and results. The results are resounding.

  34. wunsacon says:

    I agree with what our host once said: W was dealt a poor hand but played it very poorly. I would say “more poorly than imaginable”.

  35. Alan says:

    Part of the reason for better performance in the markets under Democrats is, as you say, the fact that most of the recessions have been on the Republican’s watch. Significantly higher GDP, lower unemployment and higher employment growth probably skewed the results, as well. No doubt that investment grew faster, too, under Democratic presidents. They have all the luck.

  36. Sus Ano says:

    Uhh Tom K haven’t you answered your own “So”?

    Your post initially argues that while middle class families do better under dems – all sorts of random things might occur that were outside the control of a president.

    But then you point out you are clearly aware that Obama (and historically most dems) DO want to “spread the wealth around”. Isn’t it possible that spreading the wealth around helps middle class families?

    I do however disagree that democrats follow your communist straw man about each according to his need. It’s obvious that NO credit causes economic problems – shipping can’t occur without letters of credit, factories can’t fill orders without money for raw materials, houses can’t be bought without multi-year loans. It’s also obvious that TOO MUCH credit causes economic problems.

    Maybe economic inequity follows the exact same pattern. No inequity and you get communist stagnation. Too much inequity and you get predatory capitalism fueled depressions.

  37. grhabyt says:

    Doesn’t this just show that after long Bull runs, Americans optimistically conclude that they are free of the business cycle and have no need for market rules or regulations. They vote Republican. Then when the system collapses in overreaching greed and fraud, we are left with recession, which leads voters to choose a Democrat, often at the bottom of the cycle.

  38. debreuil says:

    Also, lets not forget people tend to vote democrat in bleaker economic times (including this one). That means democrats are more likely to come in as stocks are low, and republicans as stocks are high. Obviously if you ‘buy in good times, sell in bad’ you aren’t going to do very well.

    I’m certainly no republican fan, but always a fan of impartial analysis regardless of results (at least I like to think so!)

    PS (Oscar Edelman doesn’t know how to close an anchor tag, or didn’t on purpose, so it is hard for anyone to post here – I’ve added the close, hope that fixes it).

  39. Eclectic says:


    I don’t know what planet you’re on… The boy’s DNA is a hot-wired and un-fused jumper to native logic.

  40. therealjg says:

    Re: D vs. R chart – What was that standard disclaimer? “Past behavior is no guarantee of future performance.” Voters might be wise to remember this a few days hence.

    Doesn’t socialism have an ungood record on economic development?

  41. debreuil says:

    Also, you could argue Greenspan was the best for the investor, look how much it grew under him! Of course you would have to ignore the fact that bubbles are bad in the long run…

  42. VJ says:

    What’s truly incredible is how this administration, and it’s supporters, continue to act as if all the bad things that occurred happened TO them.

  43. Eclectic says:

    Well, I see our o-t-h-e-r usual suspect for hot-wired and un-fused public commentary has shown up…

    …but not in the interests of logic.

    Enjoy opening night. I’m sure you’ve been counting the days.

  44. JustinTheSkeptic says:

    BR, you forgot to mention the “lag” effect in any policy that is put in place during a presidence tenor. That would almost suggest that the dem. are reaping the benefits of the rep. Frankly, I’m an independent so I have to deal with both their crap!

    RON PAUL FOR PRESIDENT! Ah, but we couldn’t have a logical, soft spoken man in the White House, could we?

  45. HT says:

    BR– you forgot to mention and define perhaps the most critical terms in explaining this “democratic– as the party of the disaffected– out performance”:

    1. selection bias

    2. regression to the mean

  46. the0ther says:

    who are these people who’ve forwarded this email to you Barry? it sounds like you’re in contact with a bunch of dumbshits.

  47. Joe says:

    BR – I love how you trot out the “sample size too small” argument when you need it to support your thesis, yet you deride or mosly ignore it when you are called on it.

  48. Tom K says:

    @Sue Ano

    “So?” is rhetorical.

    You speak of “inequity”, but “inequity” is an outcome, not a precondition. Is it fair that Bill Gates is n-times more wealthy than me? I would say yes, a liberal would say no. Bill Gates OWES me nothing. Bill Gates OWES the poorest soul on earth nothing. Ethically and morally, Bill Gates should help the less fortunate, but ethically and morally, government has no right to confiscate his wealth.

    There’s a huge difference between voluntary giving and forcible confiscation. Spreading SOMEONE ELSE’S wealth around is immoral, arrogant and economically imprudent. A society where the majority votes themselves wealth and services derived from the forcible plunder of a minority is doomed.

    Please tell me how Obama’s economic policies differ from Marx’ ‘from each to each’ mantra? He absolutely supports the spirit and meaning of this statement.

    btw, when it comes to voluntary giving, have you read about Biden’s pathetic record of charitable contributions? I would love to see how much Obama supporters earning over $250,000 give to charity.

  49. RJ says:


    You are absolutely correct in your above post. And someone has numbers to prove it for you. Check

    Interesting Points:
    1. The original Times OpEd ignored inflation. If you consider inflation, Republicans are ahead by 100% margin.

    2. Start measuring performance from 1932 instead of 1897, once again Republicans are away ahead.

    3. Most important of them all, if you ignore the party in charge and invested in market continously, you would become a millionaire.

    Starting Investment: 10,000$ in 1897

    Investing during only Republican parties: $156017
    Investing during only Republican parties: $217,202
    Investing in market regardless of parties:
    (hold your breath) $3,388,713.

    Well, you have your answer. I would suggest that you make another post and link to this important nugget from your highly popular blog and spread some more awareness.


  50. ben says:

    Didn’t read all the responses but no one seems to be mentioning that this ignores which party is in the house and senate. Of course, this probably has more of an impact than the pres.

    Has anyone ever looked at it that way?

  51. Rick says:

    The point about accounting for inflation is interesting, but since monentary policy takes time to affect the economy, does that mean that Republicans are “inflaters” and pass that on to the next administration?

  52. Stephen says:

    With limiting the data points to those in the chart, I think an equally good (and equally simplistic) argument could be made that the mode is more important than the mean. Throw out one or two out-liers from each party, and you seem to get a better result with Republicans. But, in actual practice, that requires timing the market. So, what I want to know is, have either party learned from our collective mistakes and be in a position to improve their historical performance?

  53. David Gaffen says:

    Why would the stock market be a leading election indicator? Logically or not, the stock market is a popular thermometer on how hot or cold the economy is. That’s why Barack Obama’s campaign placed quotes from the Dow beside John McCain, when they mocked his statement “the fundamentals are strong” in a campaign ad in September.

    “When you have a deflationary event, it usually bodes well for the Democrats, because they are the ones that are associated with better hourly wage for the worker” and other economic aid, said Quincy Krosby, chief investment strategist at The Hartford, and a former assistant secretary of Commerce.

    Through 401(K)s and otherwise, the majority of Americans now own stocks. A study cosponsored by trade group the Securities Industry Association estimated 57% of Americans owned stocks in 2005. Since the 1980s, the incumbent party has done better when the stock market was strong.

    Conversely, some of the strongest election-year market returns recently correspond with victory for incumbents: the Dow was up 11% in 1988 when George H.W. Bush held the White House for the Republicans, and it was up 18% when Bill Clinton held it for the Democrats in 1996. Jimmy Carter is a notable exception to this rough correlation: he unseated a Republican in a strong year for the stock market, 1976, then lost it on another strong year for stocks, 1980.

  54. In regard to Mankiw, YES, he’s wrong about the efficient markets hypothesis. But he’s a guy who literally wrote the book on Economics praising EMH. He’s got a lot invested in it, and if he wants to be stubborn, that’s his right (though it also makes him wrong). Placing your bet on one horse and being praised might make you reticent to back a different horse.

  55. jsp9999 says:

    Agree with a small # of samples yet it sounds like GOP is all talk capitalist and “socialist” Dem is all walk capitalist.

  56. Solodoc says:

    Please look at Congresses by Party vs market. Consider: Repubs Jan 1995-Jan 2007: Bull. Dems: 2007-now: Terrible mkt
    Repub: Controlled Senate 1981-7: great markets. Dems controlled both houses 1987-1995: mkt did well.

    Previous: Carter and all Dem Congress: Not good
    Nixon/Ford and all Dem Congress: Terrible
    LBJ and progressive Congress following 1964 blowout: Dow peaks adjusted for inflation about 1965.
    Eisenhower/Kennedy/LBJ through Jan 1965): Conserv Congress (often nominally all Dem but southern Dems are today’s Repubs): Best sustained bull perhaps ever
    (Not sure of HST’s Congress 1949-53)
    FDR (+HST through 1949): Little net movement in Dow for 15 years. Worst year in Dow history was 1931, down about half; began year near 1929 low. Dems ran House from 1931 on.

    Also note: Dec 31, 1920-Jan 2 1931 (all Repub Pres and Congress: major LT bull: from 72-170 in those 10 years, at a time of no inflation and high dividend payouts. (NB 1929 a flat year and move down in 1930 only reversed a part of the LT bull)

    Democratic/liberal Congresses tend to be associated with less strong stock returns than Repub/conserv Congresses, it would appear. The 3 great bull mkts of the 20th C (1920s, 1948-65, 1982-take yr pick for ending date) all involved Repub/conserv Congresses, often w Repub Pres. Liberal Congresses from 1931-late 1940s; 1965-Carter; and current Congress all assoc w poor markets. The liberal Congress of 1987-94 was assoc w a strong market, however.

    Could it be that Repub/conserv Congresses spend less money, leading to better free market/stock market returns than more liberal Congresses? I am not arguing that the price of stocks should determine social and tax policy; just making observations and hypotheses of specific relevance to investors. Perhaps in reality “bull” markets are really not such good things, as they always go to excess and cause much bad after the bear takes over. Perhaps BO can mandate 5% gains every yr plus 3% dividend yields; Milton Friedman might approve!

  57. sbark says:

    Just think what a stock market investment would’ve become without having to fight a anti-business, anti free market, anti-capitalism Democrat Party since the New Deal, and even more so since JFK demise.

    And how can you just decide to throw out 1929 Hoover….just because it helps the Socialist cause?

    Sarbynes Oxley Regtns brought on by Enron is placing a penalty on the economy of 100 billion……and didnt prevent a dang thing.

    Get the Govt out of the way….capitalism will fix this thing if given the chance. Obama’s meddling will cause a calamity….but then of course you would throw that out of the long term study also.