GOP won, so why is Dow heading south?

Hey, aren't Republicans supposed to be good for business? So one of them was selected in 2000, and what happened to the Dow?

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Hmmm. Didn't look so good, even though the GOP had taken all three branches of government. But wait! Jeffords screwed everything up! And it was his fault that the economy was tanking. The markets were furious at losing one of the legislative houses! So, in an incredible fit of good fortune for Wall Street the voters gave Congress back to the Republicans! And the markets rejoiced! Or did they...

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So what the heck is going on here? Just a bit of reality that has inexplicably been ignored by the CW: Republicans are bad for the markets. I blogged this over a month ago, but I don't think anyone would listen if I blogged it daily. As counterintuitive as it may be to the common and not-so-common person (including me), all the evidence shows that Republicans are bad for the markets.

Democrats, it turns out, are much better for the stock market than Republicans. Slate ran the numbers and found that since 1900, Democratic presidents have produced a 12.3 percent annual total return on the S&P 500, but Republicans only an 8 percent return. In 2000, the Stock Trader's Almanac, which slices and dices Wall Street performance figures like baseball stats, came up with nearly the same numbers (13.4 percent versus 8.1 percent) by measuring Dow price appreciation. (Most of the 20th century's bear markets, incidentally, have been Republican bear markets: the Crash of '29, the early '70s oil shock, the '87 correction, and the current stall occurred under GOP presidents.)

So why does the myth of GOP economic competence come from? One of the big reasons that the markets are spooked right now is that no one can trust corporate numbers anymore. The last thing the market needed was a GOP congress that would stymie the already too-anemic proposals being considered. Furthermore, investors want to see a competent economic team and an administration engaged in ensuring the economy turns around. Instead, they are getting Paul "what, people listen to me?" O'Neill and terrorism insurance.

And, the markets have responded accordingly.

Posted November 12, 2002 12:18 AM | Comments (127)