The Dow Jones closed yesterday above 13,000 for the first time in nearly four years. This isn't exactly an economic breakthrough -- the Dow is just one index, and there's nothing magical about the 13k plateau -- but it offers something of a morale boost.
It doesn't, however, help conservative arguments that the Obama administration's agenda would ruin the markets, terrify investors, and send the major indexes spiraling downward. In fact, much to Republicans' chagrin, Bloomberg News reported recently that the stock market invariably performs better under Democratic administrations.
While Republicans promote themselves as the friendliest party for Wall Street, stock investors do better when Democrats occupy the White House. From a dollars- and-cents standpoint, it's not even close.
The BGOV Barometer shows that, over the five decades since John F. Kennedy was inaugurated, $1,000 invested in a hypothetical fund that tracks the Standard & Poor's 500 Index (SPX) only when Democrats are in the White House would have been worth $10,920 at the close of trading yesterday.
That's more than nine times the dollar return an investor would have realized from following a similar strategy during Republican administrations. A $1,000 stake invested in a fund that followed the S&P 500 under Republican presidents, starting with Richard Nixon, would have grown to $2,087 on the day George W. Bush left office.
This was published a week ago, and the market has gone up since.
To help drive the point home, Business Week's Josh Green highlighted this chart the other day:
Bloomberg News
In 2004, a Bush cabinet official said job creation and GDP numbers don't really matter because "the stock market is ... the final arbiter" of economic success.
If that's still true, Republicans appear to have some explaining to do.
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I certainly hope the lesson of Afghanistan is very well learned in America. Where you had nothing but people to the likes of Bush, Chenney and their cronies playing Cowboys and Indian’s and how fast they could line their pockets with cash without any fore thought of their actions. And how still these Republican’s talk about ridiculous chatter instead of looking to accomplishing the right things to do. Going to war is one of the most ridiculous ventures we could ever undertake, especially in a country where the people are illiterate and ignorant to what better things could be. A simply statement from religious Pharisees that lacks the ability to think of better things for the people and is stuck in a mentality that is false will do nothing but drive their people to despair. And this is too much of what is going on in some of our religious church’s today and way too much instilled in some people in America. Do these religious Pharisees have any truth in them? Actually in reality they have very little and are really lacking in the ability of properly teaching the people of a religious faith. A person in certain cases would be better off to pray in their own room or closet at home than to subject themselves to falsehoods. But the real hope is that we do come up with better solutions to help people and to improve their living standard without the use of a military or violence.
No, wait, I think I've got it: the stock markets were boosted by Republican policies that had their full effect while Democrats were in office, and the markets' Dem-induced declines came after they left office. Yeah, that's the ticket! Dirty Democrats!
There is some truth to your point. That is because Presidential policies don't actually take full affect until 10 years down the line.
This is off-topic, but I just read that North Korea agreed to stop nuclear testing in exchange for food. FOR FOOD! This confirms just how mad Kim Jong-Il was. He let his people starve while he bellowed at the United States. A very positive step taken by Kim Jong Un and hopefully this signals a better future for North Korea.
Steve, you jest. Republicans explaining anything? Peshaaah. All the GOP does is lie, obfuscate, misrepresent, and bloviate. And when caught, they lie, obfuscate, misrepresent and bloviate some more.
Republican means never having to say...anything true.
We did not learn a lasting lesson from Viet Nam, so I am not hopeful that the belief that you can kill ideas with bullets or bombs will disappear anytime soon. People who do not have to invest their children in a war, or who have a financial interest in war are not the friends of peace. The hawks in America are like a kid with a new toy {weapon} and can not wait to play with it.
In 2004, a Bush cabinet official said job creation and GDP numbers don't really matter because "the stock market is ... the final arbiter" of economic success.
None of those numbers do, at least not anymore. Positive GDP, employment/job creation, and the stock market numbers have largely been decoupled from what constitutes economic success for the bulk of Americans. The rising tide no longer lifts all boats, or at least all boats equally well.
A better measure would be something along the lines of wage-to-consumer price comparisons, household savings/investment-to-debt, etc. Real numbers affecting real people for a real take on economic success.
A rising tide lifts all boats just fine. Houses...not so much.
The point is that the rising tide analogy works ONLY if it lifts everybody FROM THE BOTTOM UP. Great if you have a yaht. But it doesn't do dick if you have a house and car. Then you just get drowned.
GOP = blah blah blah blah, you lie, blah blah blah.....
Zora you forgot:
Obama is a socialist, terrorist, radical, blah blah worst president ever blah blah out to destroy America.
The stock market paradigm makes sense if you look closely at who benefits from the economic policies of each party.
Republican presidents do things that help business, its shareholders and executives. Few of these policies actually result in money getting into the economy and "trickling down." And these policies have little impact on the performance of a company's stock because they don't increase sales and profits.
By contrast, Democratic presidents tend to enact policies that help people who work for a living, thus putting money into the economy and creating genuine demand for the products made and sold by businesses. Sales go up, profits increase, the stock price is enhanced.
But it's not about the economy. It's about a small government with long arms reaching into your personal life and forcing a state religion upon you.
Or a healthcare premium....
Any GOP discussion on the economy that does not mention George W. should be dismissed as the fantasy that it is.
I like the chart, but the fact is that during some of those presidencies there were Democratic-majority Congresses and during some there were Republican-majority Congresses. It would be easy to take the same data, correlate it to which party dominates Congress rather than to the presidency, and have a much more ambiguous read. You have to look at the policies--and all of the factors affecting the economy--not the President. If you can make the correlation between policies and economic results, you can then look at which party will more likely pursue those policies.
My comment is about the graph you showed of how the economy goes when you have either a Republican or Democrat in the White House, from Bloomberg news. You happen to point out the spike under Bill Clinton. I think you happen to ignore in *how* it spiked so much under his administration.
First point. The Enron scandal rose from 1992 (when Clinton was president), and burst in November of 2001 (when George W. Bush was president). This means that Enron rose so much under Clinton, and went bust under Bush. All this happened under the Clinton administration, and we saw all the bad things that Enron was doing, and this wasn't under Bush's administration.
Second point. The dot.com bubble happened from 1995-2000. This was all under Bill Clinton's administration. There was massive speculation going on, and hurt the NASDAQ market. This helped to hurt the economy, because then the Federal Reserve raised interest rates from 2000 to 2001, which is credited with hurting the economy in early 2000's. This was mostly, if not all, under Clinton's administration.
Third point. The housing crisis started under the Clinton administration. The worst part of this is that there was someone who was part of a department under Clinton's administration who wanted to stop this while it was still young, which was Brooksley Born of the Commodity Futures Trading Commission. What is really interesting is that she tried to blow the whistle on this and stop it, but certain individuals of Clinton's administration, like Robert Rubin and Arthur Levitt, were able to silence her. It was not till 2008 that it all fell through, like all bubbles eventually do. What made all this worse was that in 1999, the Glass–Steagall Act was repealed, which made things even worse.
So we saw the economy do so well under Clinton because of one thing, which was that he was ground zero for three major bubbles. All three bubbles rose under his administration, which helped the economy at those times, like all bubbles do. They just fell apart later on, which happens with all bubbles. What we can say is that this shows "correlation, not causation".