While exploring the wild world of Twitter I decided to investigate the following link:
“Uh oh, I probably should have cashed out my Robinhood account today” was my immediate thought before the page even loaded. What followed was a short blurb about presidents and then a long list of each State of the Union (SOTU) and the corresponding percentage change in the Dow the following day starting from 1961 copied from The Wall Street Journal. A list of numbers? That is just begging to be played with.
Here is a graph of the average percent change for each president. The bars are Standard Error from the Mean. (Guess what the colors mean):
Ouch. Looks like on average President Obama’s updates have been a net loss. President Bush’s speeches on the other hand have been a boon for our economy. And we should have had President Ford giving SOTU speeches every day. He had the greatest average effect on the stock market (or at least the Dow) with a whopping +0.61%. It is possible that was a big effect in those days but now we see that much volatility on a below-average Tuesday.
The overall average for the speeches was -0.05%. Instinctually this makes sense. The SOTU is a chance for the President to remind us of all the shitty things happening right now and what wacky plans they have for fixing them. This is understandably going to inject uncertainty into the economy. Republicans have a slight tendency to bring the Dow up, +0.003%. The Democrats, -0.112%, not so much. If you think about what Republican and Democrat presidents might highlight (Tax breaks vs. Social Spending) this is also intuitive. Basically it becomes giving wealthier people (read: people who invest in stocks) money or taking it away and giving it to those most in need (i.e. people who would rather spend their money on rent or Taco Bell than a share of Google stock).
I also ran some regressions to see if the parties of the House and Senate mattered (they don’t) and to see if it mattered whether the House, Senate, and President were in the same party (also a no). What’s my prediction you ask? I bet Barack will stick to his guns and we will see another drop tomorrow, especially with all this talk about raising capital gains taxes, but probably not one that is out of the ordinary in magnitude. With a Republican House and Senate the likelihood of any changes in the capital gains tax impossible anyway. So the Dow should chill out.