I don’t normally pay much attention to elections.
Our political system has left us with a bunch of self-interested leaders, devoid of any ideas about how to govern, and interested mostly in enriching themselves at the public’s expense.
To be frank, facts and politics don’t mix.
It’s why I dislike government and institutions. They never admit when they’re wrong.
But no matter your feelings on this election – whether “your guy” won or “your gal” lost – it shouldn’t be a reason for making a knee-jerk reaction with your investments.
Retirement Millionaire Daily readers come from all walks of life and every political viewpoint. But one thing unites us: We’re all trying to improve our lot in life by taking an active interest in our wealth and health. Each one of us is just trying to improve ourselves one day at a time.
That’s why I leave my personal politics out of all my newsletters. And out of most conversations, for that matter.
But I decided to look at one nonpartisan question in the wake of this week’s results: How does this election affect me?
Today, we’ll share what our research into the facts and history uncovered. And we take a look at our portfolio to see if we need to make changes in anticipation of Washington’s new balance of power…
We tallied the parties in power in the White House, the Senate, and the House from 1945 to the present to see how the stock market performed over every possible combination of political parties.
Do Democrats or Republicans lead to better stock returns? Does the market perform better when the president and Congress are at odds or working together?
Here’s what we know…
Despite the GOP’s claim to be the party of business, the stock market has consistently performed better under Democratic presidents. The market adds about 10.5% a year under Democratic leaders versus 5.5% a year under Republicans. (Overall, the market has averaged 8.2% a year since 1945.)
Congress has a different effect. When Democrats own both houses, the market averages 6.7% a year. When the houses are split, the market returns 7.9% a year, and when Republicans control both houses, the market has returned 12.3% a year.
Be warned, though, that the sample size on this is rather small. Since 1945, Democrats have held at least one house of Congress for 56 of those 70 years. Republicans have only held both for a total of 14 years.
We’ve only seen Republicans own the White House and both houses of Congress for four years, from 2003 through 2007 under President George W. Bush. During those sessions, the market returned 12.8%.
It’s hard to say why the market reacts that way or even if it reflects anything the politicians do (or don’t do). Some of the biggest Democratic-president/Republican-Congress years came during the Bill Clinton ’90s… when the dot-com bubble was swelling valuations across the market.
On the other hand, Harry Truman faced a Republican Congress in 1947… and the market posted a -0.3% return.
And there’s more to look at…
We’ve long argued the economic recovery has been slowly grinding higher. The data have consistently supported that view.
Economic growth – measured by the gross domestic product (GDP) – reached an annual rate of 2.9% for the last quarter… That’s the fastest rate in two years. And the unemployment number dropped to 4.9% in October.
The simple fact is, we’re optimistic about the next year for the economy… and for the markets.
What We’re Reading…
- Donald Trump won. Now what?
- Something different: The four worst political predictions in history.
Here’s to our health, wealth, and a great retirement,
Dr. David Eifrig and the Retirement Millionaire Daily Research Team
Buffalo, New York
November 9, 2016