Both the stock market and the real economy tend to do better when Democrats, not Republicans, are in charge.
Since 1945, the S&P 500 has averaged an annual gain of 11.2% during years when Democrats controlled the White House, according to CFRA Research. That’s well ahead of the 6.9% average gain under Republicans.
“The market does do better under Democratic presidential control,” said Sam Stovall, chief investment strategist at CFRA Research.
The divide is even more pronounced in the earliest days of a new administration: During the first year of a Democratic presidential term, the S&P 500 has climbed an average of 16.7%, compared with 0.4% for Republicans.
Ten of the last 11 recessions began under GOP rule
But while Republicans are viewed as the more business-friendly of the two major parties, economic growth is significantly slower under GOP rule.
Since 1945, GDP grew by an average of 4.1% under Democrats, compared with 2.5% under Republicans, according to CFRA.
Not surprisingly, faster economic growth typically translates to fatter profits for Corporate America.
Per-share earnings grew by 12.8% on average when Democrats controlled the White House, compared with just 1.8% for Republicans, according to CFRA.
History may not repeat
Perhaps these historical records help explain why Biden’s strong performance in national polls and prediction markets this spring and summer didn’t derail the V-shaped recovery in markets.
Simply put, Wall Street has already decided it can live with a Biden White House. Many Americans recall how well stocks performed under Bill Clinton and Barack Obama, the last two Democrats to occupy the White House.
Of course, some of these historical statistics could be skewed by timing. For instance, President George W. Bush took office in 2001 during the bursting of the dotcom bubble and shortly before the 9/11 terror attacks. Both contributed to a weaker stock market and economy.
And just because stocks have performed well under Democrats, that doesn’t mean history will repeat itself.
“People shouldn’t make assumptions about how the market will perform under either party,” said David Kelly, chief global strategist at JPMorgan Asset Management. “It’s about the broad health of the economy, not particular tax breaks for this industry or that.”
That doesn’t take into account the Trump-era stock market boom. Despite the health crisis and a recent pullback, the S&P 500 has climbed about 46% since Trump took office in January 2017. And since Trump’s election it’s up even more: 55%.
Stimulus upended by epic Supreme Court battle
Still, it’s not just about which party controls the White House. The battle for the House and Senate will play a pivotal role in shaping federal efforts to revive the economy.
Read More: Stocks perform better when a Democrat is in the White House. History proves it