Why Wall Street Stands With Clinton

Wall Street favors the experienced Clinton, but this may not be the right message for a campaign struggling with populist resentment in the wake of the financial crisis.

Clinton promises ‘business as usual’ versus protectionist Trump

BY Christopher Dembik

Who would be better for U.S. investors, Democratic Party frontrunner Hillary Clinton or her Republican counterpart, Donald Trump?

How would the S&P 500 evolve with Donald Trump as president? What would be its evolution if Hillary Clinton becomes president? These are the questions we have tried to answer here.

Our approach is not to explore the candidates’ economic programs in detail, as these are likely to be significantly modified at this summer’s party conventions. For example, it is very probable that Donald Trump will be obliged to soften his protectionist rhetoric in terms of international business if he is chosen as the Republican candidate.

Consequently, our method was to conduct an historic analysis of the average changes in the S&P 500 during presidential mandates from 1930 to 2015.

The result is clear: historically a Democratic president is more beneficial to the S&P 500 than a Republican one. On average, the S&P 500 increases by 11.38 percent during the first year of a presidential mandate when the leader is a Democrat and drops by 1.27 percent when the president is a Republican.

At the end of the mandate, the difference is just as striking. By the fourth year, the S&P 500 increases by 9.65 percent under the Democrats versus a 0.62 percent increase when the Republican Party is in rule.
This analysis obviously does not take into consideration a number of other factors that influence changes in the index, such as monetary policy, the political affiliation of the U.S. Congress, the growth trajectory, or even the positive correlation with other assets, such as oil amongst others.

Moreover, it is not at all an indicator of future performance.

Nevertheless, it corroborates a diagnosis largely shared amongst the business community: Clinton would be better for the stock exchange than Trump. Perhaps that is why Wall Street would be in favor of a Democrat president, and in this case, Clinton may be the business community’s pick.

By Christopher Dembik Christopher Dembik is an economist with Saxo Bank in Paris.

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