As ever, the economy will be the key issue in the U.S. presidential race. Mitt Romney's aim will be to brand President Barack Obama a failure for his stewardship and to argue that Americans would be better off electing a Republican who knows something about business.
The team at CMC Markets set out to test this assumption by analyzing stock market returns under every president since 1900. A YouTube presentation of the report ( www.youtube.com/watch?v=tZ_CWFjFrvw ) shows that as far as Wall Street is concerned, it is better to vote Democrat. The average monthly return on the stock market has been 0.73% under Democrat presidents, almost double the 0.38% under Republicans.
Returns were highest under Calvin Coolidge, a Republican president during the Roaring 20s, when the stock market boomed ahead of the Wall Street Crash. But the next two presidents in the league table were Democrats – Bill Clinton and Franklin Roosevelt. Obama's performance, using this yardstick of economic health, has been above average – only slightly below that of Dwight Eisenhower in the 1950s and Ronald Reagan in the 1980s.
Normally higher stock market returns would be associated with higher levels of risk but, when adjusted for volatility, Democrat presidents still come out comfortably on top.
The good news for Obama is that incumbent presidents who have presided over strong stock market returns in their first term usually get re-elected. This was true of FDR, Eisenhower, Reagan and Clinton. The bad news is that the pattern does not always hold true. Wall Street did well under George Bush senior but that didn't stop him being a one-term president. It did badly under his son but George Bush junior still held off John Kerry in 2004.