Stock Market Returns Under Democratic vs Republican Presidents

The S&P 500 (SNPINDEX: ^GSPC), a stock market index that measures the performance of 500 large companies listed on U.S. stock exchanges, is often considered as the best barometer for gauging the overall health and direction of the U.S. stock market due to its scope and diversity. The index covers all 11 sectors of the economy and accounts for about 80% of domestic equities by market capitalization. 

Since Joe Biden assumed office as the President in January 2021, there has been an impressive return rate of approximately 43%, or an annualized return rate of roughly around 11%. However, with another presidential election looming over us in a few months’ time, it might be interesting to understand how this crucial economic indicator fared under different political regimes. 

Created in March 1957, since its inception until now, excluding dividends payments; S&P has seen staggering returns amounting to almost12,510%, which translates into compound annual growth rates (CAGR) averaging at around 7.4%. 

A deeper dive into these numbers reveals some intriguing insights when we break down these figures under individual Democratic or Republican presidencies. On average since its inception till date; under Democratic presidents' tenure S&P saw median CAGR close to about9.3%; whereas under Republicans this figure was slightly higher at10.2%.  

However before jumping onto any conclusions based solely on these statistics let's try looking at things from another perspective - breaking down year-on-year returns ever since it came into existence back in ’57 till present day gives quite a different picture altogether! When analyzed on yearly basis Democrats have outperformed their rivals scoring median one-year returns worth12.9% compared against Republicans who managed only9%. 

So what does all these number crunching tell us? Which party really fares better when it comes to managing economy & steering markets towards growth? Well, in reality it's not that straightforward. While these figures offer some insights, they are far from providing a definitive answer to this question. 

Firstly, macroeconomic fundamentals rather than political affiliations drive stock market trends over the long term. Even though Presidential policies and legislation can sometimes have significant impacts on the economy, their influence is never absolute or unchallenged. 

Secondly, investors who try timing the markets based on which party holds power usually end up underperforming those who stick with their investments irrespective of changing political landscapes. In fact according to Goldman Sachs research investing solely during either Republican or Democratic presidencies would’ve resulted in major shortfalls compared against staying invested throughout regardless of ruling parties. 

Furthermore as history has shown us time & again – big economic events like dot-com bubble burst; Great Recession or recent Covid-19 pandemic have all led to massive market crashes none of them could be attributed directly towards actions (or lack thereof) by any particular president/party at helm when these happened neither should one party be praised/blamed for any such occurrences! 

Historically speaking patient investors tend to reap rich rewards over longer periods irrespective of ruling parties controlling White House: S&P 500 has returned an impressive2,080% including dividends over last three decades averaging at around10.8% annually covering wide range of different economic scenarios giving reasonable confidence about future prospects too! 

This doesn’t mean you’ll see same returns every year but rather expect similar annualized returns (+/- few percentage points) going ahead into future years too! Before making investment decisions always take into account wider picture beyond just current political climate remember good stocks will continue growing no matter what happens on Capitol Hill!