Election Day is in full swing as I write this, and one would have to drive deep into the countryside to miss the excitement in the air. On Monday, November 3, those unlucky enough to be on Highway 101 were faced with gridlock that took hours to untangle. The cause? A masked gunman demanded that he be allowed to attach a campaign flag to a freeway overpass. Many reports from across the nation indicate that this election has garnered unprecedented attention. Predictions are that we will see the largest turnout ever. It’s an exciting time in America’s history.
What can investors expect to happen when one or the other political candidate is elected president? What happens historically in the short term and in the long term?
The general belief is that a Republican president is good for the economy, and thus for the stock market. In the short term the numbers bear that out. Looking back over the last 120 years, in the day following a Republican win, the stock market has advanced 0.7 percent on average. If a Democrat wins the oval office? The stock market declines 0.5 percent the next day, according to Jeremy Siegel, in an August 29 Yahoo Finance article.
But looking at long-term results a different story unfolds, as can be seen if we look at stock market statistics going back to 1953.
During those decades the average annual return of the S&P 500 index under Republican presidents was 10.7 percent, according to Morningstar Direct 2008. Not bad. The return under a Democrat president? 12.8 percent. Surprised?
Another fact emerges when we look closely at the relationship between stock market returns and politics. If we look over the last 50 years or so, the best results have been attained when one party controlled the presidency and the other controlled Congress. The best results on average? A Democratic president combined with a Republican-controlled Congress.
What does all this mean for investors today? Should we start making decisions depending on who is elected to office? Probably not. What then can we learn? Not much, other than to illustrate that being invested over the long term makes sense. Whether Democrat or Republican presidents were in office, the market manages to advance over the long run.
More timely questions today would be: Are you properly diversified? Are you trying to time the market? If you work with a financial consultant, has that consultant experienced all sorts of market conditions, whether Republican or Democratic presidents are in office? Do you have clearly defined goals for your investments and a plan to get there?
This is a critical time for investors since attention has been focused on just a few issues, primarily the subprime mortgage crisis and the election. So Democrat or Republican, take a deep breath, review your goals, and get yourself back on track.
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Kevin Bourke is a registered principal with, and offers access to securities through, LPL Financial, member FINRA/SIPC
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Interesting take on the market there, Shaw, given that BEFORE the election, the market rendered its judgment of the Republican incumbent by losing more value than any time since the Great Depression.
You want to blame someone who hasn't taken office yet for a crisis caused by his predecessor? GROW UP. The situation is serious. Thanks to the Bush league, we'll be lucky to escape a full-blown Depression now regardless of whether Obama, McCain, or the Lord Jesus Himself were to occupy the Oval Office.
Oh well. If you honestly believe the market is a good proxy for national well-being, you can take comfort knowing that the market historically does better under Democratic presidents.
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treedom (anonymous profile)
November 9, 2008 at 12:02 a.m. (Suggest removal)
The reason that the economy does better under Democratic candidates is due to credit expansion by the Fed. It is incidental and has nothing to do with the Presidents' policies. If you are interested in economics, begin researching Austrian Economic theory. Mises.org is a great place to start.
I'm glad that people around the world celebrated when Obama was elected, and as far as international relations and diplomacy I think it is great what he is bringing to our country. Where I do not agree with Obama is on his foreign policy of pre-emptive warfare. I do not agree that we should continue our overseas empire, whereas Obama wants to expand it. I don't support the western puppet dictator in Georgia that Obama supports.
I also don't support the central economic planning that is ahead. Americans have been brainwashed into thinking that we have had something of a semblance of a free-market in this country, and actually have the gal to blame our current situation on a non-existent free market. What a load of bull. We haven't seen anything CLOSE to a free market since before 1913 when the Federal Reserve Act and the Income Tax was implemented. Since then, corporate socialism has been out of control, which lead to the depression and the need for individual welfare. Now we have the Fed giving banks an investment firms cheap credit (making money cheaper for them), and you can see what happens when the government manipulates the price of money. It causes booms and busts leading to a giant crescendo of a bust, which we're all about to see.
If we had a truly free market, and the state protected property rights we would be living in a very green world. Many see the protection of private property rights as a method of protecting polluting industries. This is just more Orwellian double-speak to get you to submit to the state. Protecting private property means prosecuting polluters who pollute others' air, water, private property or other resources. This is the view Ron Paul holds regarding private property, and he has explained how during the industrial revolution, industries colluded with the government in order to allow them to pollute others' private property, completely circumventing our constitution. Ron Paul could have saved our country. There may be people celebrating in Morocco and all over the world, but Al Qaeda is planning another attack due to our recent clandestine CIA operations and bombing campaigns using drone airplanes. Ron Paul would have shut down our bases overseas and brought our military home so that they can be free to protect the United States rather than protecting multi-national corporations for the elite. Al Qaeda is attacking us because of our military presence over there, and this will not change under an Obama administration.
Every answer to every problem we face is in the constitution. Freedom works, and it has been proven. Anybody who tells you otherwise would have us submit all of our rights to the state.
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loonpt (anonymous profile)
November 10, 2008 at 9:54 a.m. (Suggest removal)
Any Obama supporters out there agree with Obama's stance on mandating community and civil service? The federal government is not allowed to enslave the population. This is a slippery slope. We're going to have some tough years ahead, and a lot of disappointed Obama supporters to be sure.
Biden has already assured us that a "generated crisis" will occur in the first 6 months of the Obama administration, and that most of his supporters won't agree with Obama's actions.
The elite are also restructuring our monetary system. Get ready for global governance. About 70-80% of the legislation that goes through the average European country comes straight from the European Union.. Our sovereignty as a nation is highly threatened.
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loonpt (anonymous profile)
November 10, 2008 at 9:57 a.m. (Suggest removal)
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