A Democratic president appears to be a better bet for U.S. markets, despite the common perception that a Republican government — with its pro-business policies — is a positive thing for the U.S. economy, Fidelity International says.
Research by Fidelity into the S&P 500 index's performance under Democratic and Republican presidents shows the index has achieved average annualized returns of 10% during a Democratic president's tenure in office from 1928 to Dec. 31, vs. 1.8% for a Republican president. Since 1945, returns during a Democratic term have been 11.4%, vs. 4.8% for Republican tenures.
Since 1928, four out of 22 terms under a Republican president ended with negative returns, vs. one negative return under a Democratic president — President Franklin D. Roosevelt's second term, 1937 to 1941.
However, Fidelity warned that investors have bigger issues on which to focus. The next Federal Reserve meeting, March 16, is one such issue.
“With markets having witnessed a volatile start to 2016, investors will be watching closely for the outlook over the Fed's tightening timeline,” said Nick Peters, portfolio manager at Fidelity Solutions, in a statement accompanying the research.
“While I think they are unlikely to hike (interest rates) in March, markets do seem to be underestimating the likelihood of rate rises in the U.S. Growth continues to be modestly positive, and with wages accelerating and inflation likely to pick up in the coming months, we may well see further rates rises in 2016.”
This article originally appeared in the March 7, 2016 print issue as, "S&P 500 performs better under Dems — Fidelity research".