Recently given the political season, there has been a spate of articles claiming one political party or the other was better for investments.
Some people used quite tortured logic; one author even reclassified Richard Nixon as a Democrat to get his desired result.
Imagine! Another trick employed was to use varying time periods to manipulate the result.
Some included the Great Depression period; others didn't.
I say enough.
Let's go back as far as we can, classify everybody as they classified themselves, and let the chips fall where they may.
I started with the Dow Jones Industrial Average, probably the best known and certainly the oldest of the stock market averages.
From the Dow Jones website we get monthly closing amounts going back to May of 1896! Control of the Presidency and both houses of Congress is a matter of historical record, also available on the Internet.
Because inflation varied greatly in this timeframe, I decided to adjust the Dow for inflation.
That way, changes in the average's value would be real, not caused by inflation.
As an example, if the Dow went up five percent in a month, but inflation was two percent, that means the real increase was only three percent.
If the Dow went up two percent, but there was no inflation, the real increase was two percent.
I considered control of the Presidency, control of the Congress, and then crosstabbed President and Congress.
Looking at the entire period from May 1896 to September 2008, the average real monthly return for the Dow was 0.
33 percent per month, or just under four percent per year.
(Remember, this is adjusted for inflation, and excludes dividends.
) For the Presidency -- When Democrats held the White House, the average real gain was 0.
32 percent per month.
When there was a Republican President, the average real gain was 0.
34 percent per month - essentially no difference.
(Remember, this includes the Great Depression years.
) For the Congress - Here there were some seemingly larger differences.
When Republicans controlled Congress, the average real gain was 0.
72 percent per month - 8.
6 percent per year.
This seems far in excess of the results for Democratic (0.
16 percent per month) or mixed control (-0.
12 percent per month) Congresses.
Here, though, we must introduce a new concept.
When speaking about a distribution of results, it is important to know the average of all the values, true.
But it is also critical to know the variability of the results - what statisticians call the "standard deviation".
In our case, the variability of the results is such that we cannot say if the difference is statistically significant - whether it is real, or just random noise in the data.
Presidency and Congress - Here we see the best results from a Republican President and a Republican Congress (0.
76 percent average real gain per month) and for a Democratic President with a Republican Congress (0.
59 percent average real gain per month).
But then again, because of the variability, we cannot say whether these results are statistically significant.
Year of a President's Term - In the past there has been discussion about whether certain years of a President's term were more lucrative from an investment perspective.
Again, we find no statistically significant difference.
Among Democrats, there is a tendency for the second year of the term to be worst, and the third the best.
Interestingly, for Republicans the third year of the term is the worst, and the fourth is the best.
For presidents of both parties, the first year of the term is typically no better than average.
There are many reasons to vote for (or against) a particular political party.
Matters of foreign policy, social issues, the environment, and other topics are areas where presidents and other politicians have a potentially great impact.
When it comes to the economy, however -- at least as expressed through the stock market -- it doesn't make a dimes bit of difference who wins.