Does The Market Care Who’s President?

Over the years as a financial advisor I was asked several times if the person in the white house really has an effect (positive or negative) on the stock market.  I’ve done some research and at first glance it appears that it does not matter who is in the white house … the market is going to do what the market is going to do.

I have looked at thirty, 4-year periods from 1901 through November 20, 2018 and this is what I found (and you can see these numbers at the bottom of the table below).  Of Course the last period is only 22 months.

Over 30 of these 4-year periods we had 23 periods that showed a rising stock market and only 7 periods that showed a declining stock market.  If you simply divide 23 by 30 you will find that the Dow Jones Industrial Average (DJIA) increased 76.67% of the time.  I used the DJIA because history of this index is readily available on the internet and it dates back to 1890.

Of these 30 periods there were 16 Republican Presidential Periods and 14 Democratic Presidential Periods.  Under republican presidents the market was up 12 periods and down 4 periods – whereas under the democrats the market was up 11 periods and down 3 periods.  I’d say this is pretty even.  You can see this table here:

Presidential Stock Markets

However, when we dive a little deeper in the numbers we find that Republican Presidents provided average market returns of 45.70% during their terms while Democratic Presidents provided average Market Returns of 78.07% during their terms.  You can see those numbers in this table:

Presidential Stock Markets 2

On the republican side:  Coolidge, Eisenhower and Reagan had some great years while Hoover and the younger Bush did not fare so well.  On the democratic side:  Franklin Roosevelt, Clinton and Obama had some very good years while Wilson and Carter only suffered minor losses.

Now that you know the numbers … this is what you HAVE TO KEEP IN MIND!

The presidents of the United States, while they may influence market direction to some degree, they really don’t control the markets.  The market is driven my money being spent and money not being spent.  Money is spent when “people are greedy” and money is not spent when “people are fearful.”

When people are greedy the “demand for stock buying is high while the supply or the selling of stocks is low.”  When people are fearful the “Supply of people selling stocks is high and the demand of people buying stocks is low.”

It really does not get much simpler than that.

Have a great day,

Jerry Nix

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