Stock Market Performance vs Congress Party Control

Feb 232009

Going back to 1945 with data from about.com, combined with historical stock market data from yahoo finance, I’ve constructed a table showing the relationship between who controls congress (and the white house) versus the growth or decline in the stock market. An image of the table is below. Click table the excel sheet.

Below the table, I point out my findings…but feel free to draw your own conclusions.

Average Stock Market gain during Democratic Congress: +9.8%
Average Stock Market gain during Republican Congress: +30.1%

Average Stock Market gain during Democratic President:
with Democratic Congress support: +13.2%
with Republican Congress opposition: +32.6%
(+18.8% regardless of Congress)

Average Stock Market gain during Republican President:
With Democratic Congress opposition: +6.6%
With Republican Congress support: +25.3%
(+13.3% regardless of Congress)

This is not my opinion. These are facts.

(data for DJIA for each year taken from 1st trading day in that year. Gains are stated for 2 year periods. Half them for annual gains.)

BintoBean

What definition are you using for congressional Support vs Opposition? How are you classifying years with divided party control between houses?
landonswan

For support vs opposition I used simple majority. I ignored years with divided party control. There were 5 sets of data with split congress. (I didn't ignore those sets for presidential data, just house/sentate data).
laoasodflasdflasdfalsdf

In statistics, the larger the sample size, the more accurate the data:

From 1926 through the end of August 2008, according to data from the market researchers at Ibbotson Associates in Chicago, the Standard & Poor's 500-stock index has done distinctly better under Democratic presidents (9.2% annually after inflation) than under Republicans (4.6%). While large stocks fared well in Democratic administrations, small stocks have skyrocketed, returning 16.5% a year after inflation, versus just 2.2% annually under Republicans. On the other hand, bonds have done much better in Republican than Democratic administrations (4.8% versus negative 0.4% annually, after inflation).

Inflation does matter, because it's tied in to purchasing power so I respectfully disagree with you on this point.

In addition to the stock market, there is also clear evidence that many other aspects of the economy do far better under Democratic vs Republican administrations: http://www.eriposte.com/economy/other/demovsrep.htm
landonswan

Do you have the same info with regard to congress control? Interesting stuff....
JakeGint

I want to know when Reps became "Red" and Dems "blue?" I swear, when I was a kid (70's-80's) it was the other way 'round.
listener

prior to making an objective decision, based upon the statistics, should the DJIA be inflation adjusted? after all it is an average of stock prices, and shouldn't prices (the dollar cost) be adjusted for inflation? adjusting pre-2009 prices to 2009 inflationary prices might be a correct set of data to start with.
landonswan

eh...not really. The numbers are based on % gain/loss period over period. So each data point may be slightly high, but inflation over 2years is negligible and it applies to all points. So no, its no big deal.

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Stock Market Performance vs Congress Party Control

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