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Wall Street has a secret.  It is perhaps the most explosive secret in the country today.  It is a secret that, if it became known, could revolutionize the American political landscape.  It is hidden by unaccessible data and surrounded by a bodyguard of myth.  The secret is that almost every single "truth" you know about politics and the market is wrong.  

To understand the secret you need to understand several things:

1.  Research has shown that it is almost impossible to beat the risk adjusted return of a market index over a prolonged period of time.

2.  The S&P 500 Index is the preferred base index for doing academic research into the market.

3.  Some stocks in the S&P Index pay small dividends but have large share price growth (earnings are reinvested in the company).  Other stocks pay large dividends but have relatively little increase in share price (earnings are paid to stockholders).  In order to see how the market is really doing you need to look at the S&P Total Return Index, which includes both share prices and dividends.

4.  To get a real return you must subtract inflation (CPI-U for the numbers I'm about to give you) from the increase.  Sure the market might be up 10% in one year, but if inflation is running 11% you actually lost 1% in real terms.

5.  Because returns are compounded, what happens in the early years of a series can have greater impact then what happens in later years.  You can solve this problem by taking an arithmetic mean (averaging all the values together), though this may not be useful in many contexts.

So I took an arithmetic mean for each presidents tenure starting in 1929 (S&P data starts in 1926 so I couldn't go back further) base on data found here http://www.bogleheads.org/...  I also computed average GDP growth bases on the inflation adjusted-chained-data found here http://www.bea.gov/....  Follow me over the jump for the results.

(All of 1945 was assigned to Truman, All of 1963 to Kennedy, all of 1974 to Nixon.  Note year to year GDP change is only available since 1930.)

What does the DATA not our subjective myths say.

The first, and I think most important thing is:

Since 1949               
All Republicans        6.21%        2.7
All Democrats        12.52%        3.8

Republicans have brought economic devastation in their wake.  If we start at Truman's second term so as to exclude the depression, New Deal, World War II and reconversion, ONLY ONE REPUBLICAN PRESIDENT SAW A GREATER AVERAGE GDP INCREASE THAN THE PROCEEDING DEMOCRAT.  That was Ronald Reagan, who averaged 0.1% better than Jimmy Carter.

Ronald Reagan was not a good president for the stock market.  His average return was only 0.2% more than the 1961-1968 average.  The 1961-1968 period included a presidential assassination, major war and race riots in most major American cities.  Reagan also turned in substantially lower GDP growth than 1961-1968.

Carter's great sin seems to have been not fixing the disaster that was the Nixon/Ford years fast enough.  He increased economic growth, but got hit with the recession of 1980 as a result of appointing Vockner to the Fed.

Eisenhower may have put up OK economic and market growth.  The major take away though is that prior presidents had the Depression, New Deal, World War II and Reconversion.  When you drop all of this by starting with Truman's second term Ike did neither as well as the Democrat who proceeded him nor the Democrat that followed him.

In the case of Obama was have a special situation of:
2009    26.86%      -3.1
2010    13.45%       2.4
2011    -1.09%       1.8
2012    13.90%       2.2

This data strongly suggests that the Tea Party threatening to cause a government debt default resulted in a mini economic collapse in 2011.  Unfortunately, even without the Tea Party, Obama has been governing like a moderate republican and has the same poor economic performance we would expect from a republican.  

What we as progressives must do is, somehow, convince Wall Street that they are killing both themselves and the country through supporting Republicans.  Unfortunately, the investment community has become so indoctrinated with Republican ideology that even a simple analysis of presidential performance has become literally unthinkable.

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Comment Preferences

  •  Tip Jar (6+ / 0-)

    http://www.aeinstein.org/organizations/org/FDTD.pdf From Dictatorship to Democracy, Guide to Non Violent Protests.

    by sdelear on Tue May 28, 2013 at 12:26:09 PM PDT

  •  If I undrstand your data it looks to me like the (1+ / 0-)
    Recommended by:
    VeggiElaine

    Stock Market has gained over 50% under Obama.

    I would hardly equate that with the performance of most Republicans.

    And this was done in the face of the mst unrelenting opposition that any incumbent has ever faced

  •  The secret Democrats & Republicans don't mention (1+ / 0-)
    Recommended by:
    Sunspots

    is that every Democratic President after FDR has over his term cut taxes on investors (Pres Obama on this will not be known until 2017) and that all  the net tax increases on investors were done during Republican administrations.  BTW, Hoover had a large tax increase on wealthy investors.

    Democrats don't mention this as they don't want to be associated with having policies that benefit the wealthy, and Republicans don't want to be associated with tax increases.

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Tue May 28, 2013 at 12:44:58 PM PDT

  •  Not new but unknown (0+ / 0-)

    I've seen the same data and conclusions in other places.  The tough part is that it isn't well known, and in some circles won't be believed.

  •  Neither new nor unknown (0+ / 0-)

    The risk-adjusted return correlation between individual securities and "the market" (the S&P 500 is an approximation to "the market"; there are better indices but the S&P can actually be traded directly with derivatives whose public markets are liquid enough to make it work) has been known since the 1970s.  It bears noting that conservatives are less likely than liberals to accept this. And MPT is anathema on CNBC, even though chart-based technical analysis is utterly discredited; if you have access to Yahoo Finance, Excel with the analytic pack installed, and some understanding of probability and statistics, you can test this yourself.
     

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