Tuesday, January 12, 2010

What makes a market thrive?

Ever wonder if the stock market performs better with a Republican or a Democrat in the White House?

Don Luskin makes the case that the economy and stock market prosper with a divided government.

“If the electorate were really smart, it would elect a Democratic president and a Republican Congress,” he says. “Under that deal, stocks have averaged a 20.2 percent total rturn, and real GDP averaged 4 percent. That tells us that economic and stock-market success isn’t really about partisan politics at all.”

But analysis of this type omits time lags. When a president takes oath in January 20, his policies can’t have an immediate impact on the economy and the stock market. The same holds true for a new Congress. New policies don’t impact things for six to 12 months after an election.

–Investors Guide

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