On taxes, for example, the cut in corporate rates has not been accompanied by an increase in research and development or economic growth. By contrast, Mr. Biden’s “emphasis on supporting the welfare of the middle class by offering greater access to education, job training and lower student debt should offer longer term benefits” that could translate eventually into stock market gains, the authors said.
Furthermore, the pandemic remains the main impediment to economic growth now and, quite likely, will at the start of the next administration. Mr. Biden calls for a much stronger federal role in promoting and financing social distancing, contact tracing and quarantines.
“Biden’s more aggressive stance on Covid-19 is likely to improve medium-to longer-term U.S. growth prospects potentially at the expense of shorter term prospects, if restrictive policies are pursued,” the report said.
And the trade conflicts, tariffs, restrictions on immigration and diminution of global institutions of the Trump era would be supplanted by a more internationalist approach — and one likely to yield substantial benefits, the report projected. In short, the authors said, a Democratic sweep of the presidency and both houses of Congress would be “growth positive.”
This isn’t the first time the stock market has shuddered at the thought of a Democratic presidency; in fact, I’ve written this kind of story before, about Wall Street’s misguided apprehensions about the impact of the Obama presidency.
But the historical record shows that since 1900 the stock market has fared far better under Democratic presidents, with a 6.7 percent annualized return for the Dow Jones industrial average compared with just 3.5 percent under Republicans. (The results are similar when measured from Election Day to Election Day.) Data provided by Bespoke Investment Group shows that these are the best annualized returns under individual presidents:
25.5 percent under Calvin Coolidge, a Republican, in the 1920s.
15.9 percent under Bill Clinton, a Democrat.
12.1 percent under Barack Obama, a Democrat.
“Wall Street generally considers Republicans to be better for market returns but historically, that’s not true,” said Paul Hickey, co-founder of Bespoke. “Democratic presidents have generally had better returns versus Republicans.”
The market under Mr. Trump has been fine — despite a calamitous drop in late February and early March — with a 9.2 percent annualized return through Wednesday.
But despite all the hoopla about Mr. Trump’s undoubtedly pro-business policies, the stock market performance under Mr. Trump doesn’t match up well against Mr. Clinton or Mr. Obama. It is entirely possible that the same would be true if Mr. Biden became president.