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Aug.26

7:31 AM ET

Tuesday, 26 Aug 2008

Do the markets prefer Republicans?

Posted By:Ariel Nelson

Companies:Bank of America Corp | General Motors Corp | Merck & Co Inc | Citigroup Inc | American International Group Inc

With the Democratic National Convention starting yesterday, the conversation over which candidate will be better for the economy will heat up. Here are some stats on the Dow and presidential elections. With the exception of FDR's takeover for Herbert Hoover, it looks like "Change" seems to be less favorable to the markets than continuity when a Republican is in office. The best year for the Dow, on the other hand, occurred under a Democrat's administration nearly 100 years ago.

Dow Jones Industrial Average: There have been 27 Presidential elections since the start of the Dow in 1896.

There have been 12 Democratic and 15 Republican victories over this time with the oval office switching parties 10 times
During election years, the Dow has been down YTD on Election Day seven times. 3 of the 7 times, the oval office switched parties.

Labor Day to Election Day: On Average, the Dow has risen +1.92%

When a Republican is in office during the election, the average goes to +0.6%
When a Democrat is in office during the election, the average goes to +3.5% (+17.6% during Woodrow Wilson's second term in 1916)
When a Republican is elected, the average goes to +2.2%
When a Democrat is elected, the average goes to +1.5%

Election Day to New Year's Day: On Average, the Dow has risen +1.90%

When a Republican is in office during the election, the average goes to +4.6% (+16% in 1900 during William McKinley's last full year in office and again in 1928, during Calvin Coolidge's transition to Herbert Hoover)
When a Democrat is in office during the election, the average goes to being down -1.4%
When a Republican is elected, the average goes to +4.2%
When a Democrat is elected, the average goes to being down -0.9%

First Year of Elected President's Term: On Average, the Dow has risen +4.85%

When a Republican is elected, the average goes to +3.9%
When a Democrat is elected, the average goes to +6.0%
When the oval office stays Republican, the average goes to +8.2%
When the oval office stays Democratic, the average goes to +0.5%
When the oval office switches from Republican to Democratic, the average goes to +13.7% (Driven by the 64% gain during FDR's first year in office after Herbert Hoover. Excluding the one data point, the number falls to 1.2%)
When the oval office switches from Democratic to Republican, the average goes to being down -4.6% (Driven by the -15.2% loss during Richard Nixon's first year in office, the -9.2% loss during Ronald Reagan's first year in office the -7.1% loss during George W. Bush's first year in office and the 9/11 attacks)

Best / Worst Election Years

Best Republican Returns - +41% in 1908 during Teddy Roosevelt's (R) last term; William Howard Taft (R) was elected
Best Democratic Returns - +23% in 1936 during Franklin Roosevelt's (D) first term, FDR (D) was reelected
Worst Republican Returns - (17%) in 1932 during Herbert Hoover's (R) last year in office; FDR (D) was elected
Worst Democratic Returns - (20%) in 1920 during Woodrow Wilson's (D) last term, Warren Harding (R) was elected

Best / Worst Market Years by President

Best Republican Returns - +50% in 1928 during Calvin Coolidge's (R) last year in office
Best Democratic Returns - +81% in 1915 during Woodrow Wilson's (D) third year in office
Worst Republican Returns - (53%) in 1931 during Herbert Hoover's (R) third year in office
Worst Democratic Returns - (33%) in 1920 during Woodrow Wilson's (D) last year in office

For the current election year, the Dow is down 14% YTD. Leading the Dow to the downside for the year are AIG [AIG Loading... () ], General Motors [GM Loading... () ], Citigroup [C Loading... () ], Merck [MRK Loading... () ] and Bank of America[BAC Loading... () ].