Stock Market Performance Under Democratic Control
Political affiliations have historically had a minimal impact on stock market returns. Despite potential policy changes, history suggests that the stock market tends to perform well over the long term, regardless of which party holds power.
Historical Data
- From 1945 to 2021, when Democrats controlled both the White House and Congress, the S&P 500 averaged a 10.5% annual return.
- From 1926 to 2023, during Democratic unified governments, the S&P 500 had an average annual return of 14.01%.
Reasons for Stock Market Success
- Economic Expansions: Stocks benefit from sustained economic growth, which often lasts longer than recessions.
- Corporate Profits: Economic growth leads to increased corporate profits, which can drive stock prices higher.
- Patience and Perspective: Bull markets tend to last significantly longer than bear markets, and patient investors generally reap the rewards.
Potential Challenges
While the historical data is reassuring, certain policy proposals from a Biden administration and a Democratic Congress could pose challenges for the stock market:
- Quadrupling the share buyback tax
- Increasing the corporate tax rate
- Declining U.S. M2 money supply
Conclusion
Despite potential headwinds, the stock market has historically performed well under Democratic control. Investors with a long-term horizon and a diversified portfolio should be well-positioned to weather any short-term fluctuations and benefit from the market's long-term growth potential.