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Stock Markets Rise Faster With Democrat in White House, Says Larry Summers

Aug.20 -- Lawrence H. Summers, former U.S. treasury secretary, talks about how a Joe Biden presidency would impact markets. Summers is advising Joe Biden’s presidential campaign on economic policy and is also a “Bloomberg Wall Street Week” contributor. He speaks on “Balance of Power: Democratic National Convention.”

Video Transcript

DAVID WESTIN: So give us your read on a Biden presidency. Is Wall Street right to be as concerned as some people, at least, are?

LAWRENCE SUMMERS: I don't think so. Wall Street was concerned before Bill Clinton was elected. Wall Street was concerned before Barack Obama was elected. Wall Street was concerned before John Kennedy was elected.

The evidence is actually very clear that the stock market goes up faster during Democratic administrations than during Republican administrations. Corporate profits increase more rapidly during Democratic administrations than during Republican administrations.

It stands to reason because effective economic strategies are from the middle out, not from the top down, and that's what tends to happen when we have Democratic administrations. We don't have anything to gain from the planet suffering from climate change. The market doesn't have anything to gain from crony capitalism and Peronism comes to America and the erosion of property rights of the kind that we have seen in the last four years. There's no market stake in active incompetence of the kind we've seen in dealing with COVID. The vice president's program would keep top marginal tax rates way below where they were in the periods when the US economy has grown most rapidly.

So nobody can predict markets. Nobody can predict the future with great confidence. But to somehow engage in these kinds of scare tactics is to make forecasts that are about as accurate as Larry Kudlow's forecasts have been over the last year or two when he's absolutely consistently been optimistic and frankly toadying for the policies and beliefs of his boss.