Optimistic Republicans Bought Stocks, Democrats Didn’t, to Their Regret

MIT study shows how reaction to the 2016 presidential election shaped investing along partisan lines.

Republicans, buoyed by Donald Trump’s election, went heavily into stocks and did well. Democrats, who were disappointed by the presidential race’s results and expected the worst, opted for the safety of bonds and cash.

As a result, Republicans have benefited more financially, with the S&P 500 up some 40% since Trump’s Nov. 8, 2016, election. The Bloomberg Barclays Aggregate for bonds is up slightly under 1% since then.

Those are the findings of a study published by the National Bureau of Economic Research and prepared by academics from MIT’s Sloan School of Management. The authors used a proprietary database of anonymous portfolio returns and sorted them by ZIP code employing campaign donations in the 2015-16 election cycle.

To be sure, the link between who occupies the White House, and economic and investment performance has been debated for years. Some claim that performance is better under Democrats because they tend to spend more federal money, thus priming the economic pump. Others say Republicans are better stewards of growth as they prefer to limit government regulations on business and to cut taxes, which gives people more money to spend. 

And certainly, the second half of a presidential tenure could look different from the first half.

But if the MIT study is to be believed, in dollar terms, Republicans have more to be happy about than do Democrats, at least for the moment.

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