Friday the 13th: Dispelling some tax myths & superstitions
At least Breaking Bad's Walter White doesn't have to worry about drug taxes

Want your portfolio to perform better? Put a Democrat in the Oval Office

Despite occasional campaign ad detours, the economy still is the key presidential election issue.

President Obama says the way to keep the economy moving and help it pick up its sluggish pace is to keep the four lower income tax rates in place, but raise the two top income tax rates.

His opponent Mitt Romney and his Republican colleagues insist that the tax increases would make things worse.

There's a good argument that the presidential and Congressional elections themselves are valuable economic stimulus programs.

Spending on all campaigns this year is expected to exceed the nearly $5.3 billion spent to win races in 2008, according to estimates by The Center for Responsive Politics,  an elections watchdog group. Those billions are being doled out by candidates, political parties and political interest groups.

But what happens after Nov.6? Well if you believe historic fiscal patterns and have substantial investments, you might want to start rooting for Obama.

"The market does tend to do better under Democrats than under Republicans," Sam Stovall, chief investment strategist at S&P Equity Research in New York, told Bloomberg News. "I dare say that most people on Wall Street are Republicans, but it appears the bread is buttered on the Democratic side."

Given the differences between the parties' fiscal approaches, that seems to be completely counterintuitive. The data, however, support that analysis.

Over the last 111 years, writes Edward W. Gjertsen in All Things Financial Planning blog, the Dow Jones Industrial Average (DJIA) has increased 7.79 percent when a Democrat has been in the White House.

This is more than double the performance of a Republican presidency, says Gjertsen. Under GOP administrations in that time frame, stock growth was just 2.95 percent.

The table below from Ned Davis Research, Inc. shows the impact of various White House, Capitol Hill political party scenarios on the DJIA, economy and inflation (Consumer Price Index, or CPI).

White House, Capitol Hill
Stocks (DJIA) Industrial Production Inflation (CPI)
Democratic President 7.79%
5.27% 4.46%
Republican President 2.95% 1.81% 1.80%
Democratic Congress 6.05% 4.49% 4.37%
Republican Congress 3.57% 1.45% 0.65%
Dem. President, Dem. Congress
7.33% 6.31% 4.62%
Dem. President, Rep. Congress 9.63% 1.11% 3.79%
Rep. President, Rep. Congress 1.62% 1.57% -0.37%
Rep. President, Dem. Congress 4.92%

Pick what you want most, a richer portfolio, stronger economic production or lower inflation and vote accordingly.

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Roger, I suspect you are not alone!

Roger @ The Chicago Financial Planner

The markets did well under Clinton, especially after the Democrats lost the House, and the same can be said for the markets under Obama so far. Considering I don't like either Obama or Romney this could be a deciding factor.

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