Politics and the Markets

Richard Nixon was once asked what he would do if he weren’t president. He said that he’d probably be on Wall Street buying stocks. One old-time Wall Streeter was asked what he thought of that. He said that if Nixon weren’t president, he too would be buying stocks.
Today is Super Duper Tuesday. There are about a million primaries going on in several different states. I don’t have much to say about politics, but I would strongly caution anyone from drawing investing conclusions from today’s results.
People love to talk politics, and people love to talk stocks, but the two really don’t have that much to do with each other. Policy, of course, can have a major impact on stocks but when it does, it’s the kind of policy that’s barely a part of the permanent Republican-Democrat debate. Sarbanes-Oxley, for example, passed the Senate 99-0, and the House 423-3 (Ron Paul being one of the three).
Stocks have done well under Democratic and Republican presidents. Stocks have also crashed under Democratic and Republican presidents. The closest thing to a constant I can find is that the stock market really doesn’t like Quaker presidents (Nixon and Hoover), but the sample size is kinda small.
My advice is to ignore any chatter you may hear that so-and-so is good or bad for the market. The assumption is that politicians are like players on a football field, and the stock market is the score. I think it’s exactly the opposite. What’s really interesting isn’t how the market responds to politicians, it’s how politicians respond to the markets.
The stock market is running unopposed this year.

Posted by on February 5th, 2008 at 9:49 am


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