Market Returns Changed By Which Party Wins White House
Which party wins the United States presidential election in November could change how investors play the stock market for years to come, says an 澳门六合彩历史记录 College of Business professor
The findings are outlined in the paper, 鈥淲hat To Expect When You鈥檙e Electing,鈥 published in the journal Managerial Finance, and are based on an analysis of security market returns relative to the political party of the president, the Federal Reserve鈥檚 monetary policy, the year of the president鈥檚 term and the state of political gridlock.
Which party wins the United States presidential election in November could change how investors play the stock market for years to come, says a 澳门六合彩历史记录 College of Business professor who has studied the financial implications of more than four decades of political power struggles.
These findings are outlined in the paper, published in the journal , and are based on an analysis of security market returns relative to the political party of the president, the Federal Reserve鈥檚 monetary policy, the year of the president鈥檚 term and the state of political gridlock.
It found that political harmony 鈥 when the same party controls Congress and the White House 鈥 is better for the stock market than political gridlock.
鈥淭he conventional wisdom is gridlock is good for the market, but actually the data show the opposite,鈥 said , Ph.D., a professor of finance at 澳门六合彩历史记录 and the study鈥檚 co-author. 鈥淚n fact, market returns are higher when there鈥檚 harmony, not gridlock.鈥
The study also found that stock market returns are higher during the third year of a president鈥檚 term 鈥 which means investors should have something to look forward to in 2019 regardless of who wins the White House in November.
Additionally, this and several other studies have found that overall stock market returns are better under Democratic presidential administrations.
鈥淚t鈥檚 not just this paper, it鈥檚 others, and they all find the same thing 鈥 that having a Democrat in the White House is better for the equity market,鈥 Garcia-Feijoo said. 鈥淎 Republican president has been historically better for bond markets.鈥
Garcia-Feijoo, who recently co-authored a book, 鈥,鈥 found in this study that the main driver for stock market returns may be monetary policy. Under an expansive policy 鈥 when the Fed lowers interest rates or buys Treasury bonds to inject capital into the economy 鈥 stocks tend to perform better. 聽
Garcia-Feijoo produced with , Ph.D., professor and interim dean at the University of Wisconsin-Oshkosh College of Business, , Ph.D., professor of finance at Creighton University鈥檚 Heider College of Business, and , Ph.D., president and CEO of the American College of Financial Services.
The study鈥檚 authors are now updating their work by looking at stock market performance following U.S. President Barack Obama鈥檚 election in 2008 and re-election in 2012. While there has been political gridlock in Washington during most of that period 鈥 Democrats controlled both houses of Congress only during Obama鈥檚 first two years in office 鈥 monetary policy has fluctuated from expansive to restrictive and at times indeterminate.
The worst stock market crash since the Great Depression ended in March 2009, just two months after Obama took office, while last year, U.S. stocks suffered its first year of negative returns since 2008.
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