Who’s Better for the Stock Market? Republicans vs. Democrats

Free marketers often assume that between the two political parties, Republicans are better for the stock market.  It makes sense. Republicans believe that economic growth can be achieved by reducing regulation and costs for businesses and relying on competition to encourage innovation.  In contrast, Democrats believe that government should take center stage in managing the economy.

The public seems to agree with the free market folks. In a CNBC poll, Americans said that Pres. Trump would be better for the stock market than Joe Biden. Among Trump supporters, 45 percent said that the stock market will go up after a year while 25 percent believe that the market will fall.  Even Biden supporters think that the market will drop under his presidency.  About 32 percent of Biden supporters think that the market will go up, while more — 38 percent — believe it will decline.

No fear, all sides can rejoice.  The stock market goes up no matter who is in charge at the White House according to Ned Davis Research, which looked at the DOW’s performance over 120 years going back to 1900.  Under a Democrat administration, the DOW average yearly gain was 3.8 percent. Under a Republican administration, the DOW was up 1.1 percent.

When researchers looked at the White House and Congress, they found that when Republicans controlled both the White House and the Congress, the DOW average yearly gain was 7.09 percent. When both branches were controlled by Democrats, the yearly gain was 2.96 percent. When Democrats were in the White House and Republicans controlled Congress, gains were down the middle at 5.2 percent.

What’s at play here? Ed Clissold, chief U.S. strategist for Ned Davis Research told Bob Pisani of CNBC: “The President is not as influential on the economy as many people think. There are many factors that drive returns and who is in the White House is only one of many factors, including the fact that the U.S. is a capitalist society, where the means of production is mostly in private hands, and that there is a court system that enforces contracts.”

Indeed, having been in the financial industry for more than a decade, I know that investment managers are nothing but pragmatists.  They will try to make money for their clients and their firms whether the country is red or blue.

But what’s key in Mr. Clissold’s analysis is that the magic of the markets and a growing economy comes from capitalism, now at risk as never before.  We have socialist-leaning politicians such as Bernie Sanders, Kamala Harris, and AOC dominating the public square.  We have CEOs managing to Environmental, Social, and Governance (ESG) standards to satisfy special interests. And we have public schools that teach America’s young people to question profit and prosperity.  Recently, San Francisco school officials wanted to change the name of El Dorado Elementary School because “The concept of El Dorado, especially in California, had a lot to do with the search of gold, and for the indigenous people that meant the death of them,” said panel member Mary Travis Allen during a September meeting. “I don’t think the concept of greed and lust for gold is a concept we want our children to be given.”

All this means that whoever is in charge at the White House, free marketers must steel themselves for the future to safeguard capitalism, and “Never give in. Never give in. Never, never, never, never . . . never give in.”

Rowena Itchon is senior vice president of the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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