Bloggers, pundits, and everyone down to Joe the Plumber agree: the upcoming presidential election, now in its last throes, is entirely about the economy. Buzzwords abound: subprime, bailout, recession … but one question on the mind of the average voter is which party will be better for the stock market and the retirement accounts of millions of Americans.   Everyone from CNN Money to college professors has attempted to answer this question using historical data. As we shall see, the historical data provide very few answers.

An October 14 opinion chart in the New York Times entitled “Bulls, Bears, Donkeys and Elephants” argued that a $10,000 investment in 1929 would have fared better under Democratic administrations than it would have under their Republican counterparts. This is not the first time the Times has tried to make this assertion; indeed, a book review from August of this year suggested the very same thing.  

The Times actively misleads its audience into thinking the market performs better under one party and thus represents the better choice for president in the upcoming election. Though admittedly opinionated, the chart suggests that the average investor should buy heavily during the Blue times and then sell everything off when the elephant comes back to town.

The Times calculated returns as of inauguration date.  It’s probably more meaningful to calculate returns as of election date, since the market will have already factored in expectations by the time the new president officially takes office.  But that’s a minor point compared to the more problematic aspects of analysis along party lines poses.

Several statistical and mathematical problems exist within the heavily biased diagram. The Times article looked at only the past 80 years – since 1929 – and used data from the S&P only. While the stock market has been operational since the Buttonwood Tree in 1792, significant data became available when Dow Jones started keeping its industrial average, right before the McKinley administration in 1897.

Since that time, there have been 19 presidents – 12 Republican and seven Democrats. The shortest, McKinley himself, held the office for a scant 881 days, a fortnight shy of Gerald Ford’s 895 mark. The longest tenured, Franklin Roosevelt, clocked nearly 4,500 days in the Oval Office.

Using data from just 19 presidents is only slightly less problematic than examining simply the last 80 years. Without more robust statistics, it is impossible to draw any significant correlation between the political party of the candidate and the performance of the market. But don’t take our word for it: let the numbers speak for themselves.

Not all chief executives presided over a gain in the market. Nixon and Hoover, both Republican, posted losses of -3.2 and -35.6 percent annually, respectively, while Jimmy Carter’s presidency saw a net change of only 8.35 points for an entire tenure loss of 0.9%.

From inauguration to inauguration, Calvin Coolidge, a notoriously laissez-faire, small-government conservative, moved the industrial average by the greatest margin, from 88.20 on August 2, 1923 (following the death of Warren G. Harding) to 313.86 on March 4, 1929, the day he handed over the reins to Herbert Hoover. This represents a growth of more than 250% during his 2,041 days in office, the largest of any president. The gains, nevertheless, were more than undone by the time FDR took over, who inherited a market at just 53.84, representing an 83% loss during the Hoover administration.

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