The Color of Money
By James M. Walden, CFA
If there’s one thing that everyone can agree on, it’s that many people are very passionate about their politics. For some, their political affiliation represents a significant part of their identity. And personal politics can sometimes lead people to see parts of the world through blue- or red-tinted glasses.
The exhibit demonstrates how U.S. consumers shift their economic views based on their party affiliation and the administration’s party at the time. We found the data fascinating.
The chart shows the responses over time from a survey by the Pew Research Center, asking how participants rate current economic conditions. The lines represent the percentage of Democrats and Republicans who viewed the national economy favorably at the time. The chart is segmented by each of the four most recent administrations.
Exhibit: Confidence in the Economy by Political Affiliation
Source: Pew Research Center (PRC), J.P. Morgan Asset Management, Clayton Wealth Partners. The survey was last conducted in May 2024. PRC asks the question: “Thinking about the nation’s economy, how would you rate economic conditions in this country today … as excellent, good, only fair, or poor?”
Without exception, Democrats and those who lean Democrat had more confidence in the economy when a Democrat was in the White House, and vice versa. Yet both Democrats and Republicans experience the same economy and have access to the same economic data. It’s clear that many of those who took the survey viewed it through tinted glasses.
With the Democratic and Republican tickets set for this year’s presidential election, we’d like to offer the following public service announcement: Don’t let your politics influence the way you think about your investments, because the performance of your investments is nonpartisan.
For example, we’re not aware of any combination of political control (i.e., which party is in the White House or either chamber of Congress) in modern history that, in aggregate and over a multi-year period, has automatically led to negative returns for the S&P 500. On the contrary, the S&P 500 has enjoyed positive returns over the span of each partisan combination.
In other words, the color of money remains green, not red, blue, or even purple, depending on who is in power. Fortunately, our money doesn’t care what party color the country leans politically.
Bullish
- The Fed has made good progress in reducing inflation since 2022.
- The Fed appears poised to start cutting interest rates in 2024.
- The most attractive yields for fixed income and cash in years.
- Consumer and corporate balance sheets generally remain healthy.
Bearish
- Slowing global economic growth with recession pressures mounting.
- Banks are tightening lending standards.
- Housing affordability remains at a decades-low.
- Leading indicators of unemployment are generally trending down.
- Delinquency rates on consumer loans are rising.
- Russia-Ukraine war, Israel-Hamas conflict, and other geopolitical concerns.
- China is experiencing a growth recession, with deflation fears growing.
- Federal debt and deficits have ballooned.