When Inflation Is Factor, Stocks Do Better Under GOP
Over the past 92 years, the return on stocks has seemingly been higher during Democratic than Republican administrations--until you consider inflation.
That factor is huge, demonstrated by the fact that it reverses the outcome. That is, after deducting for inflation, the best real returns came during Republican years.
The results, compiled by Wright Investors’ Service, show that in the 52 Republican years, the nominal return on stocks was 11.7%, compared to 13% for the 40 Democratic years.
While the after-inflation calculation brought the Republican return down to 9.3%, it cut the Democratic showing much more, all the way down to 7.4%.
The inflation factor was worse on bonds. In nominal terms, bonds achieved an average annual return of 7.2% in Republican years versus 3% in Democratic years.
Inflation cut the yield in Republican years to 5.1%, regarded as a fair showing. But in Democratic years the return fell to a minus 1.8%.
While such comparisons have value, they also have limitations created by factors such as depression and war. Moreover, one administration may inherit problems from another. And there are factors beyond any administration’s power.
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