The Investment Scientist

Archive for November 2008

After the election of Barak Obama as our next president last night, I did an exercise to find out the historical stock market performance under a Democratic vs. Republican administration since 1900.

My examination showed that the view that a  Democratic president is bad for the market is unfounded. In three important measurements: S&P 500 return, dividend growth and earning growth, stocks have done better under a Democrat administration.

However, the notion that a Democrat is bad for inflation does ring truth, as evident by the 4.8% inflation rate under a Democratic White House compared to the 2% under a Republican one.

S&P 500 return Dividend growth Earning growth Inflation
Democrat 8.1% 5.6% 10.6% 4.8%
Republican 6% 5% 5.7% 2%

Data source: Yale University Professor Robert Shiller’s database

My next exercise is to find out how the market performed during periods of Democratic control of both the White House and Congress. Sign up for my newsletter to get this information.

Don’t give up on financial innovation” by William Watson is more about Robert Shiller’s view. David Swensen did get a cusory mention.

The Economist has a piece “All bets are off” that is highly skeptical about David Swensen’s multiple asset class approach. It argues that all asset classes were driven (higher) by two factors: low interest rate and healthy global growth.

Princeton’s endowment, managed by David Swensen’s disciple Andrew Golden, earned 5.6% in 2008 (fiscal year ended in June). The performance was attributable to “non-marketable exposures and independent return managers.”

Yale Daily News: David Swensen got a raise. Now he makes $2 million dollar a year.

David Swensen derides securities lending as “make a little, make a little, make a little, lost a lot.”


Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.


%d bloggers like this: