In light of dramatic come back of President Trump back to the Oval Office, one of the questions we wanted to ask is whether it is Republican or Democrat Presidents who have bigger impact on the stock market. It turns out to be non-trivial, and anecdotally the argument can go both ways – republicans are more “pro-business” and “pro-money”, and democrats are “pro-simple-people” so both have an impact from their policies. It is an oversimplification, of course, so to make it more objective we took a look at the historic performance of the S&P 500 index going back all the way to 1988. Using a new “Market Environment” feature in AlphaBot we highlighted the time intervals of Republican Presidents being in power.
The effect is not obvious from the visual analysis, but if we look at the statistics, the results is quite interesting. The time frame when Republican Presidents are in power shows roughly HALF of the return of the Democrat Presidents with similar levels of volatility and drawdown.
The “In” values in the table below correspond to time frames Inside the Republican Presidents environment, the “Out” values – to Democrat, and the total is the overall larger number.
This is quite interesting, however it is not universal as not all Republican presidents have the same impact. If we focus on President Trump first term, the numbers will look quite outstanding, despite the large hit the markets took during early stages of COVID pandemic.
The stats for this period are quite impressive and beat those for the Democrat Presidents above. The market annualized at 16.05% annualized basis and 24.13 actual basis (if we remove the weekends when markets are not trading), with overall volatility also in line with the the market volatility overall.
So, can we inherit anything useful from this mini-study? While markets tend to perform better under Democrat presidents on average, it seems, the 1st term of President Trump was one of the best overall, and we will need to see how it works out for his 2nd term. Judging by the first week of market performance after inauguration, it may be quite a bumpy ride (hopefully, still up!).
We will keep monitoring this angle and post updates. To learn more about AlphaBot’s features, including the new Market Environment analysis tool, visit our main site alphabot.net or reach out to me.
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