Stocks do better when Democrats run the show

(Comments sparked by Economist Article of Oct. 6, 2012, p.84 discussing a study by Barclay's capital)

Many would probably assume that periods when we have a Republican President would be good for the Stock Market.  But, interestingly, since 1929 the average price change on stocks, adjusted for inflation, during the 40 years we have had Republican President's is....slightly less than zero per year.  The 44 years where we have had Democratic Presidents, on the other hand, average about 7% increase.

Even if you look only at the years where a Repubilican President's party controlled both houses of Congress, the real average return on stocks is negative.

Predictably, given that bonds do well when investor's retreat from equities when the economy is weak, bond prices when we had Republican President's averaged a gain in bond values of 1.9% while Democrats saw a loss of just under 1%.   

The inflation rate has been slightly higher under Democratic Presidents than Republican Presidents (3.5% to 3%), but far from enough to explain away the Republicans poor record.  

The advantage to Democratic Presidents goes beyond prices to income.  The article cites calculations * that the top 20% of earners, between 1952 and 2004, did better under Democratic President's than Republican Presidents (1.37% to 0.92%).  So did the poor (bottom 20%) who gained 1.56% a year under Democrats, and lost 0.32% under Republicans.

A big part of the Republicans problem is that somehow they just seem to be running the show when calamitous collapses in stock prices occur.  In 1929 Herbert Hoover was President, in 1973-74 it was Richard Nixon, in 1987 Ronald Reagan and in 2001 and again in 2008 it was George Bush.  Democratic Presidents seldom see stock market crashes, Roosevelt in 1935-36 is the only one even beginning to rise to the level of the classic Republican collapses.  But that still hardly explains the underlying huge gap over the years.

So why are the facts so hard on Republicans?  The simple answer suggested by the facts is that Republicans are incompetent at managing the economy.  Business Republicans love money, so they try too hard to cultivate it.  Perhaps Republicans are like one of those people we all know who love plants but kill everything they try to grow because they over water and overfeed.    

*  "Unequal Democracy:  The Political Economy of the New Gilded Age" (Larry Bartel's)