All Things Financial Planning Blog

Democrats or Republicans: Who’s Better?


On November 6, 2012, registered voters will have the privilege of heading to the polls and cast their ballots for President, members of Congress and a whole host of local candidates. The citizens of the United States will elect its representatives to lead our Nation through challenging economic and political times.

Individual candidates aside, which political party should you vote for if wanted robust economic growth and higher stock markets? The answer may surprise you.

The two dominant political parties in the United States are the Democrat and Republican parties. It is difficult to define the complex ideology of the present day political parties and the followers that comprise them yet alone recalling ideology of decades past. Let us start with a “who we are” from the Democratic and Republican National Committee websites:

Democratic: Our party was founded on the conviction that wealth and privilege shouldn’t be an entitlement to rule and the belief that the values of hardworking families are the values that should guide us.¹

Republican: The Republican Party is inspired by the power and ingenuity of the individual to succeed through hard work, family support and self-discipline.²

My further refinement of their respective ideologies: Democrats believe in a more equal society where Government plays a larger role and Republicans believe more in an entrepreneurial society and less Government.

Which political party, Republican or Democrats, when in control of the White House, has the highest stock market returns over the last 111 years? The Dow Jones Industrial Average (DJIA) has increased 7.79% during years when there has been a Democrat as President. This is more than double the performance of a Republican Presidency which increased 2.95% over the same period. Not what many would expect.

This appears to be completely counterintuitive given the differences between both parties’ ideologies. What can be learned from the enclosed chart when looking at political party control for both White House and Congress and its historic impact on the stock market, economy and inflation?

Stocks (DJIA)           Industrial Production          Inflation (CPI)
Democratic President            7.79                              5.27                                             4.46
Republican President             2.95                              1.81                                               1.80
Democratic Congress             6.05                              4.49                                              4.37
Republican Congress              3.57                              1.45                                              0.65
Dem. Pres., Dem. Cong.          7.33                             6.31                                               4.62
Dem. Pres., Rep. Cong.           9.63                              1.11                                               3.79
Rep. Pres., Rep. Cong.            1.62                               1.57                                             -0.37
Rep. Pres., Dem. Cong            4.92                              2.04                                               4.01
Table courtesy of Ned Davis Research, Inc.

If you are a stock market investor, you would welcome the very specific scenario of a Democratic President and a Republican controlled Congress. This combination would have resulted in a very satisfying 9.63% average gain for the DJIA.

What is the worst scenario historically for investors? This would have been during complete Republican control of both the White House and Congress. During this time, the DJIA was up only 1.62% on average, the worst performing period of any political party combination. Given the Republicans rooted fundamentals in business, entrepreneurship and small Government, this is a surprising outcome. Industrial Production, which measures output from factories, mines and utilities, also languished under complete Republican control with its second worst result of 1.57% growth.

How did stocks and the economy fare when Democrats completely controlled the White House and Congress? The DJIA had its second best result with an average gain of 7.33% while Industrial Production performed at a chart toping 6.31% growth rate. But, this scenario also produced the highest rate of inflation with the Consumer Price Index (CPI) surging 4.62% over that period. Good gains for stocks and the economy but tempered by higher rates of inflation.

Regardless of political ideology, history shows us that conflict may be the best scenario for investors. When the White House has been in Democratic control and Congress in the Republican’s hands, stock market investors have fared best.

Should you prefer gains in Industrial Production, you hope for a Democratic sweep of power. Low inflation rates, you would welcome a Republican President and control of Congress.

Who is Better? It all depends. Candidates, political parties and special interest groups are projected to spend billions of dollars persuading voters to punch a ballot in favor of their platform and candidate. They will use statistics, polls and a variety of other numbers to either taint the opposition or bolster their own standing. British politician Benjamin Disraeli stated “There are three types of lies — lies, damn lies and statistics.” Don’t be easily swayed by highlighted numbers. Dig deeper into the stated arguments and underlying statistics to better understand what you are being led to believe. Most important, on November 6, go vote.


Ed GjertsenEdward Gjertsen II, CFP®
Vice President
Mack Investment Securities, Inc.
Glenview, IL

Author: Edward W. Gjertsen II, CFP®

Edward W. Gjertsen II, CFP®, currently serves on the board of directors for the 24,000-member Financial Planning Association® (FPA®). He is vice president of Mack Investment Securities, Inc. in Glenview, Ill. and founder of The Mutual Bond Group, an organization dedicated to guide surviving spouses to financial independence. Gjertsen has been a member of FPA and its predecessor organization (International Association for Financial Planning) since 1996. Gjertsen served as FPA of Illinois chapter president and director of technology, and was awarded the FPA of Illinois's 2008 Heart of Financial Planning Distinguished Service Award. Gjertsen served as co-chair of the president/president-elect track for FPA Chapter Leaders Conference 2008, is a co-founder of the FPA diversity committee and will serve as 2010 diversity committee chair. Gjertsen holds a Bachelor of Science in economics from Illinois State University.

10 thoughts on “Democrats or Republicans: Who’s Better?

  1. What about ‘freedoms’? I should have the ‘right’ to buy a coke at lunch etc. The government should stay out of my choices! Which party is best?

  2. It’s a little late to worry about the gov’t regulating your life. We are born in hospitals operating under detailed regulation. We serve in the military – strictly regulated. We drive on the right side of the road and mostly obey the laws – regulation. Shoot someone and the law takes care of you. And we pay taxes to insure the structure of a safe and civil society. So the “right” issue is a misconception at best or jsut foolishness. .

  3. You know nothing about economics. You are just a cheerleader for the Dem Party. As everyone knows, policy changes do not produce instant results, as you would have us believe with your bogus “research”. When you factor in the delay between policy statement and realized results the chart will show the opposit results. Please stick to investment advising and stay out of economics because you have no competence in that field.

    • Interesting reply Mike. I am neither a Dem or Rep but fiercely independent. The research is from Ned Davis Research and agree that policy echo exists. Just listen to the current administration on blaming the financial crisis on the previous administration. Blame and credit is the one thing our elected officials excel in.

  4. WOW, just that simple????

  5. And what does Mike R.know about economics? Even taking into account a years lapse between Administrations, the favor still tips for the Democrats. Do your own research. The internet works just as well for you as anyone else. Of course, if you don’t want to believe it, you won’t regardless of what the numbers tell you.

  6. Would be interesting to see the returns adjusted for inflation and a lag affect incorporated. Disraeli was right. There are lies, damn lies and statistics.

  7. I really Like This Site very nice Information & thanks for sharing 🙂

  8. During the last 15 years in which each party has held the White House, we’ve seen the value of the Dow increase by 42% under Republican presidents, but 609% under Democratic presidents. In just 15 years. It simply isn’t even remotely close.

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