The stock market does better when a Democrat is president. Really. Check out the

President Donald Trump often tells supporters that the stock market — and your 401(k) — will tank if Vice President Joe Biden is elected president.

Indeed, conventional wisdom says investors prefer Republican policies such as lower taxes and deregulation, better than those of Democrats.

But the data shows the stock market does better when a Democrat is president.

Since 1945, the S&P 500 gained 11.1% during Democratic presidencies while under Republican presidents, it gained 6.8%, according to CFRA Research, an investment research and analytics firm.

The first year of a presidency shows an even wider spread. The S&P 500 rose 16.7% during Democratic rule in the first year while it gained 0.4% with a Republican in the White House, the research shows.

But why?

The convergence of the four-year presidential cycle with the average five-year bull market cycle since World War II gives Democratic presidents the stock market performance edge over Republicans, said Sam Stovall, chief investment strategist at CFRA.

“Some claim that the spending proclivity of Democrats helps stimulate the economy, earnings, and the ultimately the stock market more than the conservative policies of the Republicans,” Stovall said. “What’s more, every Republican president since Chester A. Arthur had recessions start during their first term in office. The same is not true for Democrats.”

Stovall also looked at how the S&P 500 fares when you take Congress into account, comparing returns when there was a divided government rather than what Stovall calls a “trifecta,” when one party has control of the presidency and both houses of Congress.

“Prior to the bull market surge starting in 2009, which propelled the S&P 500′s return during a divided Congress under President Obama, the stock market traditionally posted the weakest return when leadership was lacking in D.C. due to the inability of opposing majorities to agree on policies,” Stovall said.

When there was a unified government, the S&P 500 rose 10.6% on average, while when there was a split Congress, the index gained 8.6%.

Digging deeper, under Democratic rule with a unified government, the S&P gained an average of 9.8%, but when a Democratic president had a Republican Congress, the S&P gained 13%.

A unified government under Republican rule gained 12.9% on average, but when there was also a Democratic Congress, the gain was 4.9%.

Stovall said the S&P 500′s performance in the months leading up to an election is a pretty reliable indicator for whether an incumbent will keep the presidency.

“Since WWII, whenever the S&P 500 declined in price from July 31 through October 31 of a presidential election year, the incumbent person or party was removed from office 88% of the time,” Stovall said in his outlook report for the second half of 2020.

“In 2020, a market decline might also forewarn the unseating of President Trump, possibly the result of the country deciding that the Administration did not handle the Covid-19 crisis as well as it could have.”

Stovall noted that Wall Street, which does not like uncertainty, is “beginning to be concerned by the prospects of a clean sweep, with Democrats retaining control of the presidency as well as both houses of Congress.”

“The concern of this unified majority is that it may embrace a left-leaning agenda and lead to higher taxes for corporations and individuals, as well as the re-imposition of regulations on the energy, defense, finance, and health care sectors,” he wrote.

But while the S&P 500 often falls in the immediate aftermath of a “clean sweep” or trifecta, in Decembers after the election, the index has gained an average of 3.1%, followed by an average gain of 10.4 in the following calendar year, he said.

“So should a similar sweep occur, history hints (but does not guarantee) that the initial shock will send stocks lower, but then recover in the following month and calendar year,” Stovall wrote.

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Karin Price Mueller may be reached at KPriceMueller@NJAdvanceMedia.com.