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February 22, 2012 4:58 PM Like Higher Stock Prices? You Should Love Democrats!

By Ed Kilgore

At Business Week yesterday, Joshua Green made this unconventional but salient point, supported by a rather fascinating chart:

Yesterday, the Dow Jones Industrial Average briefly peaked above 13,000 before dipping at the close. Like all Dow milestones, this one touched off the usual celebration. It may be no coincidence that the market is rising under a Democratic president. In a Bloomberg Government article out this morning, Bob Drummond examines the historical record and finds that the stock market (the S&P 500, in this case) performs much, much better under Democrats than Republicans.

BetterUnderDems


So for job-killing, class-warfare-obsessed socialists, Democrats aren’t too hard on capitalists.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • Paul on February 22, 2012 5:36 PM:

    Bravo to Business Week for the original idea to track the investment as though it were removed from the market during off-party rule. I knew that the stock market had performed better under Dem Presidents, but to see the difference so plainly is astonishing.

    Now we need to see the NASDAQ and DOW to know it isn't cherry-picking. In fairness, an international comparison (same graph using DAX, Nikkei or footsie) would probably take most of the wind out of Dem sails; but I don't know for certain, and it sure would be interesting.

  • Objective Dem on February 22, 2012 5:40 PM:

    Don't be fooled it is Satan tempting people to reject God in return for material wealth. The Republicans realize this and make sure the super wealthy control all of the money in order to keep the rest of us, poor but pure.

  • Paul on February 22, 2012 5:41 PM:

    To clear up my last comment, the international comparison might show that Democrats were unusually lucky in being elected during bull markets that were, arguably, almost completely exogenous to the US political system.

  • Equal Opportunity Cynic on February 22, 2012 5:45 PM:

    Paul: Given the role of the US in world financial markets, that causality would be awfully hard to untangle. I do agree that we need a lot more data or at least some tests for statistical significance before we get too gung-ho, but it certainly questions the Republican assumption that the economy does much worse.

    Would be fun to track it back to Hoover.

  • Anonymous on February 22, 2012 5:50 PM:

    Not only that, per this week's FORBES cover story, Sheldon Adelson has gotten filthy rich under the economic policies of a president, Obama, whose economic policies he opposes as "socialist-style."

    Forbes: The man whose net worth, by Forbes’ calculations, has jumped more ($21.6 billion) during Obama Administration than any American — Mark Zuckerberg included — wants to take the president out for economic reasons.“What scares me is the continuation of the socialist-style economy we’ve been experiencing for almost four years. That scares me because the redistribution of wealth is the path to more socialism, and to more of the government controlling people’s lives."

    The only redistribution of wealth Adelson's seen is into his own coffers.

    Adelson's other big issue is Israel, a counterintuitive choice. According to the 2012 Heritage Foundation/Wall Street Journal Index of Economic Freedom, Israel is ranked a rather socialistic #48, behind less socialist Germany, Sweden, Norway, and Belgium. The US, by comparison, is an Ayn Randian #10.

    Where is John Galt? He's volunteered for the Obama re-elect committee.

    Dan

  • Mimikatz on February 22, 2012 5:56 PM:

    But under the GOP the rich get to keep more. That seems to matter more than making more, or perhaps GOPsters believe they are much smarter than the markets and don't pay attention to anything but how their own investments are doing. Or maybe they rely on inside contacts and so do better under GOP presidents irrespective of how the markets as a whole are doing.

  • Keeping Track on February 22, 2012 5:57 PM:

    It's even more stark when you crunch it down to an 11-fold increase in 23 Democratic years vs. a mere doubling in 28 Republican years.
    Obviously the stock market is a very complex system, and to ascribe the full effect to the resident of the White House is a stretch too far, but Presidents set the tone of their administrations, and these data make plain that Republican claims that their policies are good for the economy are best restated as "their policies are good for their friends." Unchecked greed becomes a damper on growth.
    From another viewpoint, a well-regulated economy is a well-oiled machine, a corrupt economy is a rotting hulk.

  • D Gary Grady on February 22, 2012 6:02 PM:

    This is probably news to most people , but those of us involved in investing have long been aware of this. The mutual fund company Vanguard, for example, mentioned it years ago in their newsletter. And it's not just the stock market that does better under Democratic administrations; the overall economy grows faster as well.

    What about the national debt? The debt load -- the ratio of debt to the size of the economy -- fell under every president from Truman through Carter except Ford (the ratio was basically flat during his brief time in office) and also under Clinton. It grew under Reagan and both Bushes and is now growing under Obama as a result of the Bush legacy and Obama's own large tax cuts (which most people seem not to know about).

    The last two presidents to balance the budget were Clinton and Johnson -- and in Johnson's case it was during the height of the war in Vietnam, the war on poverty, and the Apollo program.

  • Daniel Kim on February 22, 2012 7:49 PM:

    @D Gary Grady: re:Clinton. One should also remember that, according to projections during the Clinton Administration, we'd have zero national debt by now.

    I have a hard time understanding the opposition of the wealthy to Democratic presidents. Sometimes all I can figure is that it just kills some people that anyone else is making money, too.

  • superdestroyer on February 23, 2012 6:30 AM:

    With an inflation rate of 2.9%, it does not make sense to invest in anything other than the stock market. Leaving the money in bonds or cash results in a loss.

    The stock market is up because all of the other alternatives are lousy.

  • Robert Waldmann on February 23, 2012 7:37 AM:

    Amazingly the figure understates the case for Democrats. The idea is that when not in the stock market, money is kept under a mattress (nominal return zero). The correct alternative is to consider investing in stock compared to investing in Treasury securities. The stock under Democrats bonds under Republicans strategy would work even better compared to the stock under Republicans bonds under Democrats strategy, since there have been more Republican years (28) than Democratic years (23) in the sample.

    Also nominal interest rates were very high 74-76 (Nixon Ford inflation) and 81-88 or so (Reagan inflation then high real interest rates) compared to only 4 Carter years of high nominal interest rates (inflation). So the standard calculation of stock vs bonds not stock vs cash would show an even larger gap in performance.

  • rea on February 23, 2012 8:52 AM:

    Republicans remind me of the old story about the guy who gets one wish from an angel--but, he's warned, anything he wishes for, his neighbor will get the same, only twice as much. After thinking carefully, he asks the angel to blind him in one eye.

  • Indiana Joe on February 23, 2012 9:19 AM:

    This is old news to anyone who reads Angry Bear or Presimetrics. Mike Kimel's current project is analyzing the connection.

  • Kevin (not the famous one) on February 23, 2012 12:17 PM:

    Reminds me of the juxtaposition between impeaching Clinton .vs. queuing up a line of Monika Lewinsky equivalents to the WH. Yes, you should have your cake and eat it to.