Portfolio manager Stan Wong reveals how Democrats trumped Republicans in S&P 500 market-index gains

At this week's Democratic Party convention, speakers are offering up many arguments why their candidate, Joe Biden, should replace Donald Trump in the White House.

Last night, Michelle Obama delivered a passionate speech focusing on inclusion, values, and the future of America's children. Sen. Bernie Sanders warned about how Trump is leading America down the path of authoritarianism, so there was no choice but to back Biden.

Obama and Sanders did not talk about stock markets even though this has historically been an area of strength for the Democrats.

According to Canadian portfolio manager Stan Wong, the party of the Clintons and Obamas has presided over some of the largest bull markets in the past 70 years.

Wong is the director of wealth management with the Stan Wong Group, which is part of Scotia Capital Inc.

In a phone interview with the Georgia Straight, Wong pointed out that Bill Clinton's time in office coincided with the largest return of any two-term president in the S&P 500, a broad-based U.S. stock index.

Over Clinton's eight years in office in the 1990s, the S&P 500 increased 210 percent.

"Obama was number two at 182 percent," Wong added.

Third on the list was a moderate Republican, Dwight Eisenhower, who ruled the 1950s.

The worst two presidents after 1950 for the S&P 500 were Republicans George W. Bush (down 40 percent) and Richard Nixon (down 20 percent).

"Trump would have been right up there if it wasn't for COVID-19," Wong said.

Election will move to the forefront

“I think for now, we’re focused on the recovery out of the pandemic,” Wong said. “And if Biden wins, I think it’s baked into the market.”

That’s because Biden has been leading in the polls for quite a while.

“If Trump wins, it will be a surprise,” Wong added. “But then again, we were surprised in 2016.”

He pointed out that Trump’s 2016 victory had some short-term effects.

“The financial sector jumped almost 14 percent over the next one-month period following the election,” Wong said. “And the energy sector climbed 7.8 percent, which I found very interesting... Those are pretty big jumps.”

He attributed this to investors’ perceptions that Trump’s policies would be more favourable to these two sectors than what was expected from his rival, Hillary Clinton.

"If Biden wins the presidency, maybe we [will] see a bit of a reversal—we see the opposite happen, whereby financials and energy sectors have a bit of a tougher time," Wong said.  

However, he thinks cannabis and infrastructure-related stocks could benefit from a Biden presidency.

Wong shared other numbers from history that might interest the investment community.

For example, when Democrats controlled the House of Representatives, Senate and White House, the S&P 500 rose 10.6 percent, on average. That compared to just 4.6 percent under Republican rule of all three areas of the U.S. federal government.

And when Democrats controlled both the Senate and the House of Representatives, the S&P 500 delivered a median return of 15.6 percent.

"What I found, more interestingly, is a divided government—or a split Congress—has returned the best performance, with a 17.2 percent return on average," Wong said.

"I think what happens is the markets are more stable because there's more of a status quo situation happening—and more bipartisanship happening, as well."