Do Presidents Really Matter to Markets?--Anything Goes Forum

[userque]

Someone just said that Trump is good for the markets.

I've always wondered how anyone can really know for certain whether a president is good or bad for the markets. It's not like we can go back in time, swap in a new president, keep all other factors as equal, and compare the results.

We always attribute the rise or fall of the markets to the president.

But the mathematical truth is: Correlation doesn't necessarily mean causation.

The Chart below shows that markets perform better under democrats, but you'd think that the opposite is true as republicans are usually more pro business, etc.



Source article with higher quality chart:
https://www.forbes.com/sites/peterlazar ... c490f8239d

[stilljammi]

I don't think there's a correlation in the short term. Who ever is in office after a correction is going to see big gains. Although, usually the party of the presidency switches whenever there is a correction.

I personally believe that deregulation will always, inevitably lead to a correction down the road. I think we'd need to also see a chart with the party control of Congress along side the president to see if there's any correlation. Because there's Republican administrations who've been been forced to regulate and raise taxes because of Congress or political pressure, and Democrats who've lowered taxes and deregulated.

[bloobs]

Userque

Why do you keep using facts and evidence to state a hypothesis? It makes people who think they know everything already very uncomfortable.

[userque]

Userque

Why do you keep using facts and evidence to state a hypothesis? It makes people who think they know everything already very uncomfortable.

I try to dumb it down, but I can't help myself

[userque]

...Because there's Republican administrations who've been been forced to regulate and raise taxes because of Congress or political pressure, and Democrats who've lowered taxes and deregulated.

I believe you have that half reversed. I believe R's deregulate, and D's regulate. No?

[stilljammi]

...Because there's Republican administrations who've been been forced to regulate and raise taxes because of Congress or political pressure, and Democrats who've lowered taxes and deregulated.

I believe you have that half reversed. I believe R's deregulate, and D's regulate. No?

Correct that's how it usually works but I was referencing the exceptions, tax increases under papa Bush, glass steagall repeal under Clinton, etc. In those two examples, the opposite party of the president controlled Congress.

[userque]

Correct that's how it usually works but I was referencing the exceptions, tax increases under papa Bush, glass steagall repeal under Clinton, etc. In those two examples, the opposite party of the president controlled Congress.

Got it. My bad.

I agree that whoever-controls-Congress may also show a correlation, but even so, we probably still can't conclude causation. It could be a multitude of things pulling the strings. Those things may also be influencing how people vote; making these political correlations actually an effect, rather than a cause.

To quote from that article I linked to originally:

"The stock market is a complex adaptive system in which cause and effect are not easy to link. Market movements, particularly over short periods such as a presidential term (yes, four years is a short-term investment period), are random."

Off-topic, but since I quoted and posted the link, I must respond to his "random" conclusion for the record:

Even random is not a concrete entity. It can coexist with order. For example:

I can shoot an arrow at a random azimuth, yet it's path will travel along a predictable trajectory.

IOW, IMO, the markets contain both random and orderly components. Sometimes more of one than the other. Other times, vice versa.

[mjedlin66]

It gets closer if you exclude Hoover's massive drop and FDR's 250% first term. We haven't seen anything like the great depression in 80+ years now, I think it's safe to exclude them.

[Neuronic]

There was a recent report/poll on CNBC for the coming election and it said the market would react best to a Biden presidency with a republican controlled senate. Their reason was it would keep recent policy including tax breaks without the impulsive tweets and decisions by Trump that have caused fluctuations. The worst case they said was Biden with democratic control of Congress because of potential tax changes.

[Tomanyiron]

If Biden is elected, watch the market plummet, like it did when Obama was elected the first time. But that could be a great buying opportunity, like it was then. I say just go with the flow. No matter who's in office, money can be made.

[Neuronic]

Agreed. The only one who worries me is if somehow Bernie is elected.

[TSPBuilder]

TSPcalc would seem to prove that the president does matter based on my experience. It still predicts with high accuracy the best intervals to make gains.

[userque]

TSPcalc would seem to prove that the president does matter based on my experience. It still predicts with high accuracy the best intervals to make gains.

That would seem to "prove" that the president doesn't matter.

A tspcalc seasonal is the same, year after year, regardless the president.

[TSPBuilder]

TSPcalc would seem to prove that the president does matter based on my experience. It still predicts with high accuracy the best intervals to make gains.

That would seem to "prove" that the president doesn't matter.

A tspcalc seasonal is the same, year after year, regardless the president.

Alas, you caught my faux pas, userque Thanks for the correction!

[userque]

Alas, you caught my faux pas, userque Thanks for the correction!

But that was in interesting observation you made ... I hadn't thought of using tspcalc seasonals as evidence of: patterns, or the lack of patterns, before.