Election Returns (Part 2)

Yesterday we said that policy, not politics, has a strong effect on the market. But which policies?

When we look at real stock returns by administration, success and failure appear pretty bipartisan. We examined the S&P’s real total return for the four fiscal years following each administration’s election since World War II.

The best two returns were from Clinton’s and Eisenhower’s first terms. The worst returns were from Nixon’s second term and Truman’s first. What’s the common theme here? Inflation. Clinton and Ike enjoyed low inflation; Truman and Nixon got it in spades.

Falling inflation helps stock prices: multiples rise as bond yields fall. But just having a very low inflation rate is enough. Ike’s administration had low and stable inflation, and stocks rose dramatically.

If inflation is so important, why don’t more candidates focus on it? It may be that taking the disinflationary medicine is like eating your vegetables–useful, but not very pleasant. Or it could be that our politicians and their media colleagues just don’t understand the issue.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-03T20:59:48+00:00 September 4th, 2008|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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