Republican Power and Stock Returns

Donald Trump won the 2024 U.S. presidential election and is set to become the 47th president of the United States. This Republican victory likely contains information about expected stock returns, but it may not be the information that you expect to hear.

An interesting empirical fact is that the historical equity risk premium going back to 1927 has been much higher under Democratic than Republican presidents. This has been referred to as the Presidential Puzzle, and its explanation may have implications for expected U.S. stock returns today.

CORRECTION: I say "The equity risk premium under Trump was an annualized 14.4% while it has been 9.12% so far under Biden ending October 2024." That Biden number is for September 2024. Ending October, it is 8.63%. This correction does not affect any of the commentary or conclusions in the video.

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