Vote your pocketbook

If you just vote for whichever candidate you think will be best for the economy, you should vote for the Democrat every time. Surprised?

According to Brad Simpson, Chief Wealth Strategist at TD Wealth, Republicans have held the White House for 65 years since 1900. During that time, the average stock market return has been 7.9%. Not bad, but during the 55 years that Democrats held the White House, the return was 12.0%. Historically, the market does 50% better under Democrats.

Focusing on 75 years since World War II, Democrats have held the White House for 36 years; the market has returned a stellar 14.4%. In the 39 years Republicans held the White House, the return has been 8.4%. Thus, Democrats outperformed Republicans by a whopping 70% margin since World War II.

Trump brands himself a genius at running the economy. Let’s compare him to Obama. When Obama took office in January of 2008, the economy was in free fall. In March of 2008, about 6 weeks into his first term, the Dow Jones Industrial Average (DJIA) bottomed at 6470. What followed was the longest bull market in American history. On Nov. 5, 2016, that bull market was still going strong, with the DJIA at 18,332 – a meteoric 8-year rise of 278%. Taking compounding into account, the annual rate of growth was 14.55%.

The bulls kept right on galloping, to the last day of the Obama administration and beyond. When Obama left office in January of 2016, the Dow was sitting at 19,804. If we credit Obama for all the gains from March 2008 to January 2016, that comes to 300%, which equates to 15.0% per annum, for 8 straight years.

Trump inherited a Dow at 19,804, and the market gained nicely, for 3 years and one month, hitting a pre-COVID high of 29,551 on Feb. 12, 2020. That’s a gain of 49%. When you take compounding into account, the annual growth rate for Trump’s first 37 months in office was 13.88%. In other words, he managed to extend Obama’s bull market for another 3 years. If you plot the unemployment rate during Trump’s first three years in office, you find that it extends the steady drop in unemployment during the Obama years, in virtually a straight line.

Then the pandemic hit. That would have been terrible for the stock market, no matter who happened to be President at the time, so we will not count it against Trump.

Therefore, at least superficially, it is nearly a tie. Obama’s 15.0% growth rate for 8 years was better than Trump’s 13.88% for 3 years, but not by much, particularly if you take into account that a sizable portion of the gains between the 2016 election and the 2017 inauguration were caused by the anticipation of a tax cut and infrastructure spending under Trump.

But the DJIA is not the same as the economy. During a time when 20 million people have lost their jobs, the Dow has been on an epic climb. Rich people with investments in the market are raking in money, while working people without stocks have lost homes and run through savings, and are on the verge of being evicted.

There is also the federal budget deficit. In Obama’s first year, to stem the momentum of the financial meltdown he inherited, he ran the deficit up to a then-record $1.43 trillion, according to Thereafter, he reduced the deficit every year through 2015 ($442 billion, a two-thirds reduction from 2009), leaving office with a deficit of $585 billion in 2016. By contrast, Trump, who campaigned on a pledge to eliminate the national debt, has instead increased the deficit every year, despite the galloping bull market. In just 3 years prior to the pandemic, he had already nearly doubled the deficit ($1.08 trillion in 2020, not counting the impact of COVID). Because of COVID, of course, the deficit has ballooned to a previously unthinkable $3.70 trillion, on Trump’s watch.

So Obama had stock market returns equal or better than Trump’s. At the same time, Obama reduced the deficit and Trump increased it. When you add all that up, it’s really no contest. Obama managed the economy better than Trump, judged by these macroeconomic measures. But what do you expect? After all, Obama is a Democrat, and Trump is just a Republican.

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