Elections and "Real" Returns

07/05/2016 9:00 am EST

Focus: STRATEGIES

Marvin Appel

President, Signalert Asset Management LLC

Regardless of your political leanings, you have to admit that we have a wide choice in this election, notes by Marvin Appel, president of Signalert Asset Management, LLC.

The ultimate winner could have a significant impact on the direction the country takes.  But he or she might also have a big impact on your investments.

Which candidate would be the best for stocks? A look at the historical record can guide us.

The table below shows the performance of the Dow Jones Industrial Average since 1901 (price-only, no dividends, with data from Ned Davis Research). 

In the table below, the percentage control of the bicameral Congress is calculated by the average representation of each party in the House and the Senate.

 

Stocks
(DJIA, price-only)

Inflation
(CPI)

Real Stock
Returns

Democratic President

7.59

4.21

3.24

Republican President

3.02

1.8

1.2

Democratic Congress

5.94

4.24

1.63

Republican Congress

3.82

0.73

3.07

Dem. Pres., Dem. Cong.

7.07

4.4

2.55

Dem. Pres., Rep. Cong.

9.47

3.52

5.74

Rep. Pres., Rep. Cong.

1.7

-0.37

2.07

Rep. Pres., Dem. Cong.

4.46

4.01

0.43

All Periods Buy/Hold

5.14

2.94

2.13


Unequivocally, Democratic presidents on the whole have been better for stocks than Republicans. This is true in terms of both actual price gains and price gains less inflation (even though inflation has historically been much higher under Democratic presidents).

Investors can take heart in the likelihood that Republicans will remain in control of Congress.

Since Republican Congresses have delivered better stock market price gains after taking inflation into account (“real returns” in the table above). 

Therefore, using history as a guide suggests that Hillary Clinton would be the best president for stock market performance.

The best overall historical outcome has been a Democrat in the White House with a Republican Congress. 

By Marvin Appel, president of Signalert Asset Management, LLC.

Related Articles on STRATEGIES