Which Party Has Been Better for Stocks?

by LPL Research

After the second presidential debate last night, the race continues to heat up. According to Senior Market Strategist Ryan Detrick, “‘Under which party do stocks perform better, Democrats or Republicans?’ is always a popular question. As we discussed in our Midyear Outlook, going back to 1900, the Dow has done slightly better under a Democratic president than a Republican president. Although stocks have performed slightly better under Democrats over time, the bottom line is that gridlock is the best case for stocks.” Gridlock is a split Congress or a president from the party opposite the one in control of both houses of Congress.

Here is how the S&P 500 has done under various presidents going back to President Eisenhower. Only three times has the S&P 500 been negative during a president’s term, with all three happening under a Republican president, and all three taking place during an economic recession. History has shown that economic recessions usually lead to lower equity prices. The best total return was the 84.5% gain during President Obama’s first term, which came on the heels of the Great Recession and the rebound from a deep bear market.

Copyright © LPL Research

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IMPORTANT DISCLOSURES

Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Stock investing involves risk including loss of principal.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, geopolitical events, and regulatory developments.

Because of its narrow focus, specialty sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Dow Jones Industrial Average (DJIA) Index is comprised of U.S.-listed stocks of companies that produce other (nontransportation and nonutility) goods and services. The Dow Jones Industrial Averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors, and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore, their component weightings are affected only by changes in the stocks’ prices.

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