Political Parties and GDP

Have you ever wondered why your candidate is better for the economy than the other candidate? Ever think supporters of the opponent are thinking the same? It is interesting to note that both sides feel their party and their candidates are better for the economy and stock market.

We surely saw this phenomenon in last year’s Presidential election, and we saw it following the election. According to a monthly Bloomberg poll on U.S. economic expectations, the percentage of Democrats that felt the U.S. economy was getting better went up 12 percentage points following the election. The opinion of Republicans and Independents was, generally, unchanged over the October to November poll period.

Annual GDP Growth & Market Returns by Political Party Control
(1937-2011, parties identified as President/Senate/House)

While we like to think our party is best, there is no clear winner. As seen in the charts, U.S. Gross Domestic Product (GDP) has historically been the strongest with a Democratic President and a Democratic Congress. However, stock market returns have historically been the strongest under a Republican President and a Republican Congress. Our current governing structure of a Democratic President and a split Congress has historically resulted in both favorable economic growth and favorable stock market returns.

Another observation from the charts, and a more important one, is that our economy grew and stock markets went up over time, regardless of what party was in office. Regardless of your political views, capitalism still governs us all.

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