Who is better for the Stock Market: Democrats or Republicans?

Arthur Stein Financial, LLC |
J.P. Morgan’s June, 2012 Guide to the Markets  report detailed the affect on stock market returns of political control of the White House, Senate and House of Representatives from 1940 to 2008.
 
The results are surprising.
According to the report, the stock market performed best when the President was a Democrat. The weakest returns occurred with Republican Presidents.
 
This table summarizes the five different combinations and the resulting stock market return.
 
1940-2008
 
Controlled by
 
1
2
3
4
5
White House
Democrats
Democrats
Republicans
Republicans
Republicans
Senate
Republicans
Democrats
Democrats
Republicans
Republicans
House
Republicans
Democrats
Democrats
Republicans
Democrats
Average Stock Market Return
17.2%
13.4%
9.5%
7.6%
5.7%
 
Column 1 seems to indicate that gridlock is good for stocks; column 4 leads to the opposite conclusion.
 
It seems to me that the common thread is that Democratic presidents are best for stock market returns. I do not know why that would be true.
 
Note:
The returns do not include reinvested dividends.
 
This presentation is for educational purposes only. The information presented here is not specific to any individual's personal circumstances. To learn more about the strategies mentioned and if they are suitable for you, consult the appropriate professional before implementing. Arthur Stein Financial, LLC does not provide tax or legal advice.
 
Any information provided in this presentation has been prepared from sources believed to be reliable, but is not guaranteed and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for information purposes only and does not constitute a recommendation.
 
Keep in mind that:
  • Past performance is no guarantee of future performance;
  • To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. Tax laws can change at any time;
  • Investments involve the risk of loss of principal and earnings;
  • Mutual funds, including money market funds, ETFs, etc. are not guaranteed in any way by the US Government, the FDIC, a bank or anyone else.
  • “Average annual return” evens out variations in the actual year-to-year returns.
  • Both stock and bond mutual funds and individual stocks and bonds fluctuate in value and there will always be times when they lose value.
  • None of the information provided by Arthur Stein is necessarily relevant to anyone’s particular situation. Situations differ among individuals and you should not assume that these generalizations or information apply to you.
  • Investments mentioned may not be suitable for all investors.