Today, we’re only going to invest according to color.
We’re going to assume that, because of some sort of cinematic, Hollywood plot device, an investor awakens from a coma and learns that Wall Street has changed. Now, investors only invest based on color preference – purple or gold. To that end, our reawakened coma patient is given a couple of charts to examine and told to pick whichever color she wants to own heading into the future.
Here are the two charts she’s given…
As an emotionless investor with nothing else on which to base her decision, our newly awake coma patient makes the logical choice.
“I’ll go with purple,” she announces. “It seems to do better, and it’s definitely more consistent.”
Now, let’s replace the colors and the titles…
This is not political commentary. It’s purely historical analysis of S&P 500 returns by political party, which seems relevant as we run towards the next presidential election in less than 80 days.
A long-standing myth holds that Republicans are the party of business and, thus, are the white-hat fellas who drive wealth higher on Wall Street. Democrats, the antithesis declares, are tax-happy, anti-business black-hats who destroy wealth on Wall Street.
The numbers prove that’s “fake news.”
Democrats have actually been better stewards of Wall Street, on the whole, in America’s post-war decades.
In fact, if you’d have invested only based on party – buying the market when your party was in power; jumping out when the opposing party took control – every $1 would have grown to $1.60 under Democrats, but just $1.29 under Republicans.
Another long-standing myth, meanwhile, holds that Republicans are the party of “small government” and budgetary hawks. Alas, statistically, that too is a bogus talking-point.
Democrats have been better stewards of America’s pocketbook, as you can see in this chart showing the degree to which each president increased the country’s deficit during his time in office…
The only “hawk” in the red camp was Eisenhower.
The only budget busters in the blue camp were Carter, who spent four years saddled by the stagflation and recession sparked by the (Republican) Nixon years; and Obama, who inherited the tail end of (Republican) Bush Jr.’s housing and debt crisis. The rest of Obama’s term saw deficits steadily trending lower.
Same goes for the US dollar, the global reserve currency who’s strength or weakness reflects perceptions of America’s underlying fiscal and monetary health. (The data only go back to 1971, in the middle of the Nixon administration.)
Blue beats red – by a long shot. Carter undermines the Dems because, again, he was stuck cleaning up Nixon’s mess.
Again, this is apolitical commentary. It’s meant to separate myth from reality, since there’s so fraudulent claptrap that voters will hear in the run-up to November 3.
Who knows who will win this time around. And, of course, past performance is no indication of future results. But when all you have is history to call upon, then it’s clear that blue – not red – has been the true steward of the economy, the dollar, Wall Street, and America’s pocketbook.