A few days ago, Allen Edwards posted on Facebook this thought-provoking comment:
“If you took $10,000 to invest 50 years ago, and followed the pattern of investing in the S&P 500 during GOP presidencies, and at 5% in bonds & bank accounts during Democratic presidencies, you’d have about $60,000 today. If you took the same $10,000 and reversed this, investing in the S&P only during Democratic presidencies, and keeping it in bonds & accounst earning 5% during GOP presidencies, you’d have about $350,000 today.”
I had to check it, of course. I downloaded monthly S&P historical data from Yahoo for the period 1960 to the present, set up a spreadsheet to do the calculations (ignoring dividends and compounding interest monthly), and this is what I got:
| Value at end of President’s Term in office | ||
| Invest in S&P 500 with Dem Pres; 5% bonds with GOP Pres | Invest in S&P 500 with GOP Pres; 5% bonds with Dem Pres | |
| Starting amount: | 10,000 | 10,000 |
| End of term of: | ||
| Kennedy/Johnson | 18,600 | 14,700 |
| Ford | 25,500 | 15,400 |
| Carter | 33,300 | 18,000 |
| Reagan | 49,600 | 39,700 |
| Bush 41 | 61,100 | 60,500 |
| Clinton | 189,100 | 84,000 |
| Bush 43 | 227,500 | 56,200 |
| Obama (Sept ’10) | 351,100 | 60,800 |
Note that the big changes occur during Clinton’s term and Bush 43’s term — investing in the S&P while Clinton was in the White House tripled your portfolio, and getting out of the market during Bush 43’s term allowed you to keep it.
Edit
I should have also posted what you would have if you left your money in the S&P 500 for the entire time — you’d have $204,000. If your investment strategy was to get out of the market whenever a Democrat was president, you’d have paid a severe penalty for missing the Clinton years.
Another Edit
This really doesn’t say anything about which party is better for the market. The gain during Clinton’s presidency was due to the dot-com bubble; the loss during Bush was due to the collapse of the housing bubble and resulting financial crisis. One could argue that the collapse was because of Republican policies, but that’s another story.