Any bid for the Presidency of the United States, from the tight race to the outcome, will surely affect both the U.S. economy and the capital markets at large. The 2012 election is no exception.
Follow our blog series for regular updates on the election and how each candidate’s strategy could impact the markets.
Today’s post focuses on Which Party Is Better for the Markets?
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’Tis the season to dust off the charts answering the age-old question of whether markets prefer a) the Republicans or b) the Democrats to be in control of the executive and legislative branches of the federal government. For those of you that answered c) stalemate, you’re right. Going back to 1928, the markets, on average, have performed best with the Democrats in control of the executive branch and the GOP running the legislative branch.
To be honest, I put about as much credence in the market forecasting ability of the balance of power in Washington as I do in the notion that stocks go up when a team from the NFC wins the Super Bowl, this year notwithstanding. You might also note that markets seemingly prefer the Dems in charge of the executive branch regardless of which party controls the houses of Congress. To be fair to the GOP, having Herbert Hoover (1929) and George W. Bush (2008) occupying the Oval Office during the two biggest market meltdowns of the past century certainly skews the numbers in the left’s favor. More often than not, sitting presidents often benefit or suffer from policies put in place by their predecessors or from structural macro themes that are out of their control.
If you’re not like me and you assign credibility to the chart above, you’ll be happy to know that the current odds on the 2012 election have the president being re-elected with the Republicans keeping the House of Representatives and taking control of the Senate. Clearly that’s as good as it gets for the markets (sarcasm off). Of course a lot can change in the next 10 weeks. Remember, in August 2008, John McCain had opened up a 5-point lead over Barack Obama in national polls. The challenge for President Obama is still daunting. As we have said before, if Obama stays in the White House, he would be the first president re-elected with a sub-50% approval rating, an unemployment rate above 7.2% and a University of Michigan Consumer Sentiment Index below 90.
Congress also remains too close to call. The Republicans will likely maintain control of the House, although with fewer seats and a more conservative profile. The Senate is still up for grabs. The Democrats currently have 47 seats that are either considered to be safe or leaning left. The Republicans have 44. Control of the upper house will come down to 9 “toss-up” states.
The Republicans appear to be in the driver’s seat in most of the toss-up contests. The uphill climb for the Dems to control the Senate would have to go through Indiana, Missouri (Senator Claire McCaskill is leading Congressman Todd Akin in the latest polls), and Virginia. A 50/50 even split of the upper House is also not out of the realm of possibility.
For those of you hoping for the “magical” combination of a Democrat in the White House and Republicans controlling Congress, the Democrats running for Senate can still destroy this dream. Not to worry. If the Dems eke out a victory in the Senate and Obama holds on for another term, the balance of power will be the same as it has been since January 2011. The S&P 500 Index is up over 16% since the new Congress took over.1
1. Source: Bloomberg, 8/22/2012
Read more from the series Election Insights 2012 at http://blog.oppenheimerfunds.com/tag/election2012/
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WEBC.082712
What you present as the optimum combination of White House and Legislative balance is exactly what will be the ultimate undoing of this country’s economic future. Another four years of the nightmarish spectacle we have just experienced is a sure recipe for the continued diminution of American economic credibility in the world: continued credit downgrades; poor consumer confidence; Congressional gridlock; a weakening of the Federal Reserve’s corrective influence; and ultimately a lack of investor confidence . . . . and we all know how that ends for the poor souls who
decide to keep their money invested in the markets.
It’s the elected people more than the party who solve or create problems. Unfortunately, they are all selfish bandwagon, party line voting, out of touch “best for me” businessmen. The Hoover, Bush skew is the most valid point, along with fact that presidents often preside through the numbers provided by the result of his predecessor’s policy. Did we forget that FDR was after Hoover, or that Clinton was before Bush, and that Reagan/Bush sr were before Clinton? FDR and Clinton (and Bush jr and Obama) were HEAVY spenders with money we didn’t have. Imagine our economy if we didn’t spend over 50% of our tax revenue to service debt we all ready have? Imagine the Dollar and inflation if we didn’t devalue it just to make debt less expensive? We’re an import nation, and for that reason a strong dollar is worth cutting the debt. ” Another four years of the nightmarish spectacle we have just experienced is a sure recipe for the continued diminution of American economic credibility in the world: continued credit downgrades; poor consumer confidence; Congressional gridlock; a weakening of the Federal Reserve’s corrective influence; and ultimately a lack of investor confidence” This is going to have fallout no matter who takes office, but amen. Get rid of the nightmare PLEASE!
Democrats will do much better
What Both parties need to do is work together it’s not about them but the American people
So, the markets have done the very WORST with an R in the White House and the R’s leading Congress. And done very well with a D in the White House and the D’s leading Congress (see chart)
Man, Romney better hope he loses. His dividends are going to tank, otherwise.
Averaging your averages here’s what I get:
White House Congress
Repub Dem Repub Dem
8.0% 15.4% 10.2% 11.4%
Yes, the Republicans, avowed protectors of the nation’s business sector, can’t even lead in their preferred category when they are in charge. Perhaps business leaders would should heed that they tend to back the horse that does less for them and should send much more of their cash the way of the Dems. Clearly the Republicans do more for the nation when they are the less-than-loyal opposition and I wish them success in occupying that role.
The Koch brothers are spending $millions on Romney in hopes to turn the American people back to the age of big business running their lives, resegregating schools and doing away or reducing social security and medicare.
It is disingenuous to claim that the historic market meltdowns during the Hoover and G.W.Bush administrations skewered the numbers. It was the very policies of those Republican administrations that caused the meltdowns. The fact that the meltdowns came near the end of their respective terms is further evidence, not of the suffering from ‘ structural macro themes’ of prior administrations, but of the market policies of the Republican presidents.
It also appears your election data is somewhat out of date. The Presidents job approval rating is above 50% (as of this writing it is 52%) and Romney’s habit of insulting our allies and otherwise suffering from ‘foot in mouth’ disease is not endearing him to the electorate. This is not a helpful combination all of those formerly toss-up contests. The more the Republican agenda is revealed the less the voters seem to like it.
Well go ahead and vote for Abama again and see this country become a third world nation.
That was certainly a political answer. “Trying to make everyone happy”
Way to take a stand, Jerry! A stalemate…um, that’s soooo unhelpful. I guess you want to so comfortably straddle that middle road and keep from alienating your audience that you write an article with no meaning.I wonder how many indices and other economic data you crunched before you settled on the one (the S&P) that supported your “I don’t want to offend anyone” theory. No wonder my funds just haven’t been performing well.
This analysis is overly simplistic because it does not consider the time lag between policies and economic indicators or the movement of the previous administration. The Clinton Administration’s rise was due to the fact that he primarily kept the policies of the Regan Administration that were doing well. Obama’s boost was due in part to the artificial influx of funds to keep financial institutions afloat which gave these institutions capital to invest in the market. As we are seeing, these moves are neither sustainable or going to indefinitely reproducible. The next administration whether Republican or Democrat will have a tough time maintaining an increased faced with a $16T national deficit and ever-increasing expansion of the federal government taking more GDP; thereby, removing capital from the economy.
This analysis may be cute to throw up during an election cycle, but it in no way is statistically significant or thorough enough to make long term investment decisions. In spite of all of these wonderful supposed gains, the NAV of my long-term investments is still below the pre-bubble years that was due to Clinton’s neglect of regulatory oversight.
So… Obama got an unfair boost from Obama?
Obama saved us from the worst depression ever. I’ll stick with him. I am way off better now than when GW bush/cheny ran the government and started two wars. It cost a lot of money to bail us out of the mess and national dept spiral bush left behind. He raised the national debt ceiling 17 times in his 8 years. No wonder both bushs, cheny, karl rove, powell, etc. didn’t show their faces at the Rep. convention.
This article twice refers to Democrats as “the left” but does not refer to Republicans as “the right.” Also, it refers to Democrats as “Dems” but does not refer to Republicans as “Repubs.” Prejudiced report.
If Obama is reelected then our country and it’s freedom will move into a socialism that will ruin our economy. This economy will not follow historic courses if we remain with the present government direction but is setting the stage for high taxes and more spending completely outside the constitution constraints on government. This is setting the economy up for massive inflation and debt, not to mention massive regulation, that will eventually collapse the economy and finish the movement to a “new world order” leftist pipe dream. How is the both party advice, if the above is true, going to help us with financial decisions if we then play the middle ground?
I might assume I sound like an alarmist . . . But what good is playing the middle advice even if only some of this is true? Past history may not apply to our present situation given the new paradigm.
Jerry is right. But the real issue are the next Supreme Court Judges…to me this is the main reason to vote for Romney we cant afford to have anymore leftist judges.
Amen!
Since the markets are rigged and controlled by the 1%ers it really doesnt matter who controls Washington. The middle class of America was auctioned off during the Reagan years along with any hope of economic advancement. WE can thank the 1%ers, investment bankers and wall street for their never ending greed and unsustainable profit margins for our current economy and destruction of the middle class of America
Good points… lets not forget that Obama is also funded in part by the 1%. That may be why he wants to raise taxes on any American family making 250K or more per year. That’ll stop them from trying to open self sustaining small businesses in local communities – Yeah! get ‘em!. At the end of the day, the 1% don’t really care if they have to pay a little more or less for taxes because with the amount of cash they have it is pretty much a game of bragging rights – who got away with paying the least amount of taxes. They already have more money then they can logistically spend so it doesn’t even matter. For them it’s about power over the ‘little people’ (as they say), and bragging rights for who made the most $$$ while ‘getting away with’ paying the least in taxes.
“EXCELLENT” … I would like to know your prediction !!!
“EXCELLENT”!!.. I would like to know your election prediction.
R M MOTTO
Obama’s re-election will be good for the economy as people will be covered by health insurance and fewer bankruptcys will result. the GOP’s antedeluvian social program will end up in the ashes of history as it should. People want health and financial security but destroying Medicare and Social Security as proposed by the GOP solves nothing.Romney may not realize it but many thinking people do not mind paying reasonable taxes to support the dissbled, the poor, the children and our retired Military heroes.Progress is occuring in spite of GOP mindless incompetence at assisting in providing jobs and mortgage relief!
How well the economy does is directly proportional to how well government leaves it alone! Bailing out the financial institutions does not benefit the taxpayers who financed the bailout!
Where can I get a 2012 Studebaker? One car company fails… another emerges. One bank/loan company fails… another emerges. The cycle of economic life continues.
Your analysis does not show the level of government interference in each term. Nor does it show if interference was derailed by veto or override.
When riding the fence, watch out for the barbed wire!
There is a desperate need to delete both Nazi Fascist Parties of the US including senate and congress and re-establis the Liberterian Party with Ron Paul in Charge as President.
The world problem is these two Fascist Nazi Parties led by an illegal from africa with NO US Birth Certificate, No Credentials, No Political Experience, and Narcissistic to the degree thinking he is King?
Until you get rid of this trash there will never be a solution to anything.
I do not want either of them. I want the ballots to have an area (printed On The ballot ) which allows EVERYONE the opportunity to be able write in none of the above
Love all the happy rationalization by Repubs of this plain and durable fact that Democratic administrations are good for the markets. You can prove it using the Dow Jones, too – or simply increase in GDP. There’s a very simple dynamic at work: a more level distribution of income is good for the economy as a whole because it puts more disposable funds in the hands of those who will spend them, and who will spend and invest almost exclusively in this country. Doomsayers of “socialism” should also note that the US economy has steadily lost ground to more socialist economies for decades now. I can respect – and even partly share – an ideological resistance to collectivism, but there’s no longer any real disputing that an effectively planned socialism is the most productive economy. See, e.g., Germany, Norway, the Netherlands, etc.
If you look at the history of Coolidge and the great depression, you understand the playbook and result mirror each other. Reagan took us there and Bush finished us off. Are people really stupid enough to support Republicans. The economy can be fixed over night with regulation and a smidgen of protectionism. Bring the manufacturing and offshore money home…problem solved. See Roomeny for the poster child of the problem.
Interesting article Jerry but many are missing the point in this whole election. It’s worrisome that so many have faith in government and would be willing to sacrifice freedom for security; economic security. It appears that many, rather than take a risk to make, let’s say, a million dollars, they gladly take no risk and be content with $100. The problem here is that the $100 is taken from those that took the risk and made a million!
What’s more, I’m hearing a lot about the Progressive movement and their belief that government should evolve based on our “enlightenment” since the the late 1700s. It’s as though our Founding Fathers were a bunch of adolescent dolts. I would argue that man advances through technology and not some evolution of deeper understanding and thinking.
Government does play a role and the Founding Fathers explicitly defined that role. Unfortunately in the preamble they left a loophole when they stated “promote the general welfare”. Some take this to mean “provide the general welfare”.
I’m losing faith in the American people that so many don’t see the dangers of an ever expanding government presence in our lives. Keep this up, we’ll be enslaved once again.
We are in dire need of a leader that will clearly identify our key issues, our national priorities, and his/her concepts on how to implement corrective actions. These actions must be rooted in the recognition that it is not within the President’s power to to do this alone. His function is to lead a polarized congress, and a frustrated and frightened populace, toward accommodation to take difficult and substantive action on such critical, large scope issues as an energy policy, a cohesive foreign policy plan, national security, cyber security, tax reform, budgetary control and support of the U.S. dollar.
He must have the courage to say that we, the citizenry, are part of the problem. We elect our legislators to push the programs that we like, and that benefit us. We like our social security benefits, public and private employee lifetime retirement benefits, corporate and personal tax breaks, special ear mark programs, etc. Why would any intelligent elected official vote for a program, regardless of the large scope national benefit, if his ward, district or state clearly deem it detrimental to their particular interests? We have become a nation of special interests…while no one is looking out for our national interests.
Do Gov. Romney or President Obama have the courage to tell us what they truly believe the major issues to be, and how they will address them…regardless of the political consequences? Do they have the vision and the understanding of what made this nation an economic powerhouse and a beacon of hope in a world in turmoil?
This election is about leadership. It is about a nation in search of who we are, and where we want to go.
a few years ago i was working with a group of investors on a large shopping center.at onemeeting i asked them which party they liked in office for the type of investments they preferred which was mostly shopping centers.they preferred democrats because they could pay off their loans easier.
Why do we need to raise income taxes, cut Medicare or Social Security, or even the military budget? There is plenty of money in America. Why don’t we put a small transaction fee on each financial transaction on Wall St? A penny, or in times of financial stress like wars and depressions, a dime, on every stock, option, CDC, bond etc traded. At the very least it would put an end to the algorithmic coin shaving that is currently the rage on Wall St. No more flash crashes if each transaction cost you more than you make.
Obama so loves the poor that he created millions more while partying with the 1%.
There is no act taken by the Obama administration, no matter how tyrannical, which elicits reaction of any kind. There is no loss of rights inflicted upon Americans that will cause Democrats to speak up against Americans no longer have any rights which their government need respect. The onslaught against civil liberties and human rights has been perfected under the Obama regime with the complete and unqualified support of the Congressional and Senate Democrats an ever worsening situation.
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