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Donkeys, Elephants and US Private Markets: The 1990s

How the political color in the United States has helped shape the investment landscape

Part I: The 1990s


For non-US readers, a brief explanation of the title is called for. If you are not aware, in US politics there are two dominant parties, the Republicans and the Democrats (there are currently only 2 independent Senators out of 100 and no independents in the upper chamber of the US Congress). The Republicans commonly use the image of an Elephant as their mascot to represent themselves while the Democrats adopt the Donkey. For both Americans and others, I will leave you to research for yourselves the origins of this symbology which originated from a 19th-century political cartoonist.


Economies and investment markets typically rise and fall through cycles. While the political parties incumbent in the branches of the US federal government are not the only influencing factor, they can and do shape the policies, regulatory frameworks, and often economic stimulus which have a material impact on sentiment and market developments. As mentioned, the political landscape is dominated by two major parties, the Republicans (historically associated with fiscal conservatism and low taxes) and the Democrats (more often thought of as more socially liberal). Each have their own philosophical approaches towards government and economic and budgetary policies. This is not a dissertation paper on US politics, but rather an attempt to understand how the policies of each party have historically impacted private markets investing. With the 2020 US Presidential Elections just weeks away, the aim is to explore how economic cycles, presidential eras, and the US private markets aligned (or misaligned) over time; are there any patterns or observable correlations?

The US has 3 distinct branches of government: Legislative, Executive, and Judicial. Each has its own role to play, but most would agree that the Executive branch of the President in the Oval Office is the single most powerful and influential over the sentiment and economic fortunes of the country. Therefore, in this discussion, we will focus on the Executive branch. In addition, any conversation about the US economy and markets should also include the US Federal Reserve since its guidance and response in terms of monetary policy impacts investment sentiment and behavior at all levels of the economy.

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