E Pluribus Unum II - Elections and Markets

This post will compare the winner's margin of victory in U.S. Presidential elections since 1824* (Winners Margin) to the return of the Dow Jones Industrial Average** (DJIA) for the winner's term, i.e. the next four years. The goal is to see if there is any correlation between the "division" in the nation's electorate and the subsequent stock market return. 

Source: 

List of Presidential Elections by Popular Vote Margins

Dow Jones Industrial Average, Annual Development

*Presidential election popular vote data starts with 1824.

**The DJIA was not created until 1896. Research showing implied data is used for this illustration. 

Red indicates winner lost the general election.

Results:

• A .23 correlation coefficient indicates a positive yet small correlation between winner's margin and subsequent four year stock market performance. 
• The ten highly divided elections (winner's margin under 2%) had mixed high and low stock performance. 
• Four of the five elections where winners LOST the general election had negative subsequent returns. 
• The major exception is 2016 and the +50% four year gain.

Conclusion:

Despite all the potential data problems and the use of equity returns as proxy for economic prosperity, the Republic appears to do better when Presidential elections are won by larger margins. Unity may beget value.