Readers vote: Is Obama or McCain better for investments?
Some readers disagreed with last week’s blog post about whether a Republican or Democratic president is better for your investments or argued that the president has less influence than Congress on the markets.
A survey by Edward Jones of 1,000 investors, found that more believed a Democrat in the White House would be better. I had also added statistics from the Stock Trader’s Almanac four years ago that found the market did better under a Democratic president going back to 1901.
Readers were right to point out that a president doesn’t act alone. Congress passes the legislation that affects taxes and investments.
Reader Joan Magnani writes: “Since the President has only veto power and it is Congress that makes law, it would be interesting to know which years Congress was dominated by either Republicans or Democrats. Also, some laws show an immediate effect on the economy while other may take years to have an effect. An example would be the mortgage crisis. That did not happen overnight. Tax cuts might have an immediate positive effect, but perhaps not so positive down the road. Do you know which party dominated Congress during which years? I would be interested in knowing.”
I don’t have those stats yet or the latest figures on how the stock market has reacted in the last four years, where half the time the president’s own party controlled Congress and the Democrats controlled it the other half.
Market experts have argued that gridlock, where one party holds the White House and the other controls Congress, is the best combination. When I tackled the topic the last election, Jeffrey Hirsch, publisher of the Stock Trader’s Almanac said: "The best combination I found in looking at the different administrations is a Democratic president and Republican-controlled Congress."
Let’s hear what you think.
Here are other readers’ comments:
From Nick: “Your article is full of BS statistics. Have you ever heard of the time lag of economic policies? A very misleading article for the average reader, but fits in well with your ultra-liberal newspaper."
From Tom: “I am interested in the remark: "Statistically the market performs best when a Democrat sits in the Oval Office.” I am assuming that this is measured solely on the term of office and does not reflect the fact that stock market cycles do not neatly dovetail changes in administrations. Thus the remark has no meaning. For example, there is a better than even chance that the market will start a rally sometime in 2009 regardless of who is elected present if the housing market stabilizes and the economy improves. Anyone who casts a vote for president based upon the market doing better based upon the candidate's party is being foolish. The important consideration is which candidate offers the best chance of a better economy and gives an indication that they are willing to grapple with the serious problems facing this country going forward. This will determine how the market reacts, not which party has seen better market results. The comment in mutual fund prospect, "Past performance does not guarantee future results", applies here as well. For the record, a John McCain presidency would be a continuation of the Bush disaster in my opinion.”
Edward Gamble wrote: My niece in Baltimore forwarded me a copy of your article entitled "Putting your vote where your money is". There is no date and I didn't see the article listed on your web page. I would like to take issue with the financial statistics in the last paragraph which you attribute to the Stock Trader Almanac.
Without knowing what they were using for data, I'm presenting you with my analysis of the limited info shown in the article; as follows; 1. Percentage gains primer: a. If you make 100% return, you have doubled your money, b. If you make 200% return, you have tripled your money; etc and so forth.
2. Data in the article: Note: These analyses assume that money was put under a mattress when not invested!!!
• a. Republican Presidents - as stated = 56 years and average rose 386.7 percent: this means the money growth factor was 4.867 to one; so $10,000 would grow to $48,670, representing a yearly compounded rate of 2.866 percent; to check: Raise 1.02866 to the 56th power which yields 4.867.
• Democratic Presidents - As stated = 48 years and average rose 639.6 percent; so money growth factor = 7.396 to one; thus $ 10,000 would grow to $73,960, representing a yearly compounded rate of 4.257 percent; to check: Raise 1.04257 to the 48th power which yields 7.396.
The Republican value is somewhat less the article value of $ 81,300; but, the Democratic value about $ 200,000 less that the article value of $ 279,705.
There is Political bias involved here someplace!!!
3. My overall view: This information does not relate to the working family. In 1901 no one except the elite rich had $ 10,000 to invest in the stock market. My Grandfather was raising 6 children on a farm within Baltimore City. The farm was 200 acres and he could have bought it for $200, yes just $1 an acre. Not able to afford that much, he rented it for 10 cents an acre. Subsequently it was rented for a total of 50 years by my father and uncle. When they had to leave in 1951 because of impending development by the Roland Park Co., the land was worth $10,000 an acre. Thus, $200 had grown to $ 2,000,000, and a growth of 10,000-to-one was missed.
That is a compounded rate of 20.2 percent per year. Money was made in land not the stock market!
(AFP/Getty Images)
