Politics and The Markets
It’s election time again and investors want to know what the respective parties can do to get the economy back on the right track. Currently, high inflation is the talk of the day, but can your favorite politician or political party really help? We think not since inflation is mostly a supply-side issue of which the Federal Government has no control and as such despite the Fed continuing to raise interest rates and sell off its holdings of bonds, inflation has remained stubbornly high. What is next for investors and the markets as both seek to understand and interpret the Fed’s attempts at conquering this historically high inflation?
Where are current market opportunities, and where should you look? Are there opportunities in Health care, which has had the biggest job gains as of late? What about Professional & Technical Services, could this be the next area to explore to find stocks that could be part of a market beating portfolio? Unfortunately, your favorite politician or party of choice will not be much help in assisting you. For interest’s sake, let us take a look at how the stock market has performed when the White House is occupied by either a Democrat or a Republican. The results might surprise you.
Democrats and Republicans generally have a strong difference of opinion about what creates a thriving economy and stock market, but what are the historical facts about the performance of the S&P 500 when each party has held the Presidency?
At the start of 1926 through 2018, the S&P 500 has returned an average of 10.0% annually. How did the market do when a Republican President held the office? When a Republican was at the helm the market averaged 6.3% which is well below the average for the period, an underperformance of 3.7%.
As for the Democrats, the S&P 500 returned an average of 13.5% when they occupied the Oval Office, which exceeded the average return for the period by 3.5%, a significant outperformance. So, under Democratic leadership, the stock market outperformed Republican led administrations by 7.2% during the study period.
So, are you going to change your voting habits? Of course not, but does the historical data suggest something that we are missing? Maybe when Democrats win the White House people feel more empowered and included in the political policies being pushed by the winning political party. As for the Republican party, why the lackluster performance versus the Democrats? Could it be that more people do not feel represented, and this translates to bad investor and consumer psychology which negatively impacts the market? Your guess is as good as ours. So, the question remains, is there a better solution that gives you the ability to avoid politics when building your investment portfolio?
Yes, at Investoristics there is no betting on political parties or analyzing what typically happens after the mid-term elections, we only analyze relevant fundamentals that identify market betting stocks. If you are tired of missing opportunities to build better and less risky portfolios with significantly higher returns than the overall market, then please visit us at investeristics.com. We are awaiting the opportunity to provide greater details about our approach to investing and how it can help add value to your existing portfolio. And the best part is that it does not matter which political party occupies the White House since our approach is built for any market or political environment.
