Which Candidate is Best For Your Portfolio?

To say uncertainty is dragging down the markets is an understatement.

The financial accident continues to unravel in the United States. Every financial commentator is talking up the U.S. Government's list of more than 100 "problem banks."

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Fears of someone else Asian financial accident are gaining steam. The Thai baht, the Russian ruble, and the Chinese yuan are all well off their highs and in a downtrend. Even commodities are getting rocked. High-priced metal, oil, natural gas, and base metals are all in freefall.

Yet there are some surprises...

The U.S. Dollar has had a solid month-long upswing and has resumed its place as the protection currency of choice. Who would have predicted that two months ago?

Over this scenery of uncertainty is a hotly contested election. We're entering the final leg of the U.S. Presidential selection and it looks like it's going to come down to the wire. The most recent Gallup poll has McCain/Palin edging out Obama/Biden by a relatively slim 4%(with a 3% margin of error).

Over the next two months, we're going to hear a lot about which candidate is best for the stock shop and how to get positioned for whoever wins. We'll be told to sell curative industry stocks in prospect of Obama's national healthcare system. Or we'll get told to buy oil stocks if the McCain/Palin mark swings into the lead.

Regardless of who finally wins, we'll have the same old problems hanging over the markets...financial crisis, recession, inflation, etc. Whether candidate will have to deal with it. But a lot of investors might be pulling for Obama.

Why? The talk is because the stock shop does best when a Democrat is sitting in the Oval Office. Cnn says, "The stock shop performs best and tends to be less evaporative when Democrats are in power."

In this case, Cnn is right. But should we be pulling for an Obama win just to help get the markets turned around? If we look at the historical returns of presidents from different parties, the talk may surprise you.

When it comes to the stock market, there is no best historian than Dr. Jeremy Siegel. The University of Pennsylvania professor has compiled data on the U.S. shop back into the 1800's. In his book, Stocks for the Long Run (a must read for any investor) Siegel reveals the impact of a President's party affiliation.

Dr. Siegel has discovered the following:

Stock shop execution and the U.S. Presidents

Time Frame
Political Party
Average each year Return

1888 to now

Democrat

10.85%

1888 to now

Republican

8.25%

1948 to now

Democrat

15.26%

1948 to now

Republican

9.01%

The data suggests that our brokerage accounts would be healthier with President Obama. But these historical numbers don't tell the whole story.

For instance, Republican President Herbert Hoover officially took office January of 1929. That's nine months before the worst crash in U.S. Stock shop history. During his four year term the stock shop fell about 80%. Hoover stayed in office until January of 1933, the same year the stock shop ultimately hit rock bottom. The shop averaged a 20% loss per year During Hoover's presidency.

Democrat Franklin Roosevelt moved into The White House close to the stock shop bottom.

Under Hoover, every 100 dollars invested in the stock shop was worth at the end of it. Under Roosevelt, the stock shop gently climbed back to its former 1929 highs and. The shop took 13 years to return to pre-crash highs, but since Roosevelt came in at just the right time, the shop returned about 400% over his four terms. That would make every invested at the start of Roosevelt's presidency worth about 0 at the end.

In reality, the 0 an investor had in the shop when Hoover took over would have just been about 0 at the end of Roosevelt's presidency.

Roosevelt came in at exactly the right time. The incompatibility in returns (an 80% loss in four years compared to a 400% gains in 13 years) has a big impact when we look at returns over the past 20 years. Considering there's only a 2.6% midpoint incompatibility in each year returns, that one 17-year huge price swing accounts for a big part of the difference.

Also, we've got to reconsider President Bill Clinton rode the tech-bubble to amazing each year returns. And, of policy by luck of the draw, he got out just two months before the March 2001 peak. Republican Richard Nixon was in office During the early 70's bear shop as well and resigned at the worst inherent time from a stock shop valuation perspective.

In short, Republicans get the boot at the bottom and Democrats come in and ride the positive return.

But are the democrats causing the stock shop to rebound? If so, how? Is it their policies? Their capability to instill reliance in the U.S. Economy? Or have they been just lucky? Not even the biggest Bush-hater would propose that his policies triggered the dot.com crash.

Frankly, it's a tough one to call. History moves in big waves, sweeping everything with it, together with Presidents. But one thing we can tell from additional data: when the same political party controls both the presidency and congress, it's not good news for the stock market.

When the same party rules over all of Washington, the midpoint each year return for the stock shop is only 11.83%.

It's a much different story when one party controls congress and the other the presidency. The midpoint each year return of the stock shop when During these periods is a respectable 16.34%.

My conclusion is that the selection of President doesn't of course matter that much to the stock market. Technically, the Democrats do have a slight edge, but the flukey timing of the great depression and the dot.com crash accounts for most of this "edge".

Don't let the presidential elections worry you or impact the decisions you make. There's too much other stuff that of course has a requisite impact on the market. Right now, unemployment is surging to its top point in four years, every devotee calling for someone else "shoe to drop" in the financial sector, and investors' uncertainty is rising each day...that stuff of course matters.

Stocks are very cheap and it seems everyone is selling. everyone is getting nervous. This is the time I buy stocks. I'm not the only one though. David Dreman is development the best of the current uncertainty. Dreman manages about billion and made his mark as a leading contrarian investor by recommending going long stocks in the early 80's right as the markets were beginning a multi-decade bull run.

Dreman recently stated, "Between inflation and the liquidity crisis, this is one of the toughest markets I've seen. But it's not a shop you sell into. Any losses you take by being too early will be more than offset by buying cheaply."

The best investors in the world aren't letting emotions rule their decisions and you shouldn't either. Buy great companies selling at allowance prices, everything else will work out. It always has regardless of which party controls Washington.

Which Candidate is Best For Your Portfolio?

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