The Great GOP Stock Market Myth

The market commentators on TV are at it again. The high-wire stock market will not only avoid virus-induced catastrophe, they tell us, but stocks will then soar to new highs. Unless Democrats capture the White House. In that case, “Look out below!”

Wall Street has long believed stocks do better with a Republican POTUS. As a wealth manager quoted in the Financial Times explains: “Historically, equity markets have favored Republican presidents as they generally have more market-friendly policies.”

Except . . . historically the stock market has done no such thing. Since 1976, FT reports, the average annualized return under

Democratic presidents has been 14.3 percent, against 10.8 percent under Republicans.

In a really long-term comparison, 1920 to 2016. the Democrats win by a landslide. Annualized return for the Dems: 10.83 percent. Republicans (penalized by both the Great Depression and the Great Recession) 1.71 percent.

Why do Wall Streeters cling to the myth that Republican presidents lead to bigger investment gains? Perhaps they're too credulous. Republicans may talk “market friendly” and Democrats may threaten tougher taxes and regulations, but politicians' ability to influence the economy and stock prices is probably less than they would like us to believe.

What’s “Wealth”? Most Americans Aren’t Sure

According to Yale researchers, most Americans underestimate the wealth gap between white Americans and black Americans. Most also have trouble defining “wealth."

Wealth can be a difficult concept to get ahold of. If you get into the weeds, economists and accountants may disagree about what exactly should be counted. But for a basic definition wealth is assets minus debts. In our own samples, when we ask people to define wealth, only about 20% of our respondents are getting that right. Most talk about money along with things like values. That’s consistent with the messaging of asset management firms. Their websites have testimonials that highlight happiness, retirement, and providing for your family. Whatever the reason, the study participants don’t understand wealth well.

The Same Old Bull

Came across this twenty-year-old Wall Street Journal illustration while cleaning out my graphic archives. Still timely.