Aug. 10 (Bloomberg) -- I’ve been struck in recent weeks by the number of my Republican clients and friends who hold strong feelings against President Barack Obama. They see him as a socialist who will ruin the U.S. economy.

Most people I know are convinced that their party, be it Democrat or Republican, is best for the country, the economy and the stock market. Yet an objective look at the evidence shows that neither party holds a decisive edge in stock-market and economic performance.

An analysis by Tommy McCall, former information graphics editor of Money magazine, was published in the New York Times on Oct. 14, 2008. It showed the average annualized stock-market return under every U.S. president beginning with Herbert Hoover.

Bill Clinton, a Democrat, led the field with a 15.2 percent compound return in the Standard & Poor’s 500 Index, not counting dividends. The next four best performers were all Republicans -- George H.W. Bush (11 percent), Dwight D. Eisenhower (10.9 percent), Gerald Ford (10.8 percent) and Ronald Reagan (10.2 percent).

Next on the list were five Democrats -- Harry S. Truman (8.2 percent), Lyndon B. Johnson (7.7 percent), Franklin D. Roosevelt (7.5 percent), Jimmy Carter (6.9 percent) and John F. Kennedy (6.5 percent).

Tenth and 11th places went to two Republican presidents under whom returns were negative -- Richard Nixon (down 3.9 percent) and George W. Bush (down 5.1 percent). Worst was Hoover, a Republican, with a 30.8 percent compound annual rate of decline.

Economics and Luck

Of course, it’s debatable how much a president influences the economy and securities prices. Clearly, the Federal Reserve plays a role, as do market forces and plain luck. Clinton, for example, benefited from the technology boom of the 1990s.

Another interesting way of looking at the data comes from a report issued by Ned Davis Research Inc. of Nokomis, Florida. The study presented more than 100 years of stock market data spanning March 4, 1901, through July 8, 2008.

Measured by simple price appreciation on the Dow Jones Industrial Average, Democratic presidents have been better for the stock market than Republican ones. The average annual price gain in the Dow has been 7.2 percent under Democrats and 3.6 percent under Republicans.

What about inflation? Under Republican presidents, inflation has been held to a stingy 1.9 percent per year. Under Democrats it has run to 4.6 percent a year.

Balance of Power

Inflation-adjusted, the annual price gain in the Dow industrials has averaged 2.5 percent under Democratic presidents and 1.7 percent under Republicans. The figures still favor the Democrats, just not by much.

Ned Davis, head of the research firm, says that both bonds and stocks do better when one party controls the White House and the other party controls Congress.

He’s right, and I would go a step further by observing that the ideal combination for stocks has been a Democratic president and a Republican Congress. Under that combination, stocks have jumped 9.6 percent per year, not counting dividends.

Price gains have averaged 6.6 percent when Democrats control both the White House and the Congress. When the Republicans hold the presidency and the Democrats control Congress, gains have averaged 5.7 percent.

The worst scenario has been one in which Republicans snag both the presidency and congressional control. In that situation, the average Dow gain is just 1.6 percent. (Again, the Republicans look better if inflation is considered.)

Presidential Popularity

I had always thought the stock market preferred a strong presidency and a popular president. I was surprised a few days ago to see a New York Post article saying that high poll ratings for a president correlate with mediocre stock-market returns over the ensuing 12 months.

It turns out that that Post was citing data from Ned Davis Research. The Davis folks plotted weekly values for the president’s approval in the Gallup poll and measured the price gain in the Dow 12 months from that date.

When the president’s approval rating was 65 or higher, the gain over the next 12 months averaged only 2.4 percent. When approval was 50 percent to 65 percent, the average gain was 6 percent. And when approval was between 35 and 50 percent, the best gains were achieved, averaging 12.3 percent.

Presumably, the lesson is that when things don’t look too rosy, there’s room for them to improve.

Election Cycle

A president can be too unpopular, though. Ratings below 35 percent (Nixon late in his term, and Carter twice) were associated with a stock-market loss of 13.8 percent over the ensuing 12 months.

Here’s one more tidbit. The election cycle exerts a powerful influence on stock prices.

In the third year of a presidential term, the Ned Davis team found, the Dow appreciates by a median 15.2 percent. That number is based on 27 presidential cycles going back to William McKinley in 1900.

For the election year itself, the average price gain is 7.6 percent. The second year (when mid-term elections are held) shows only a 2.1 percent gain. And the first year of a president’s term shows a loss, on average, of 0.6 percent.

Of course, there are exceptions -- in fact, this year appears to be one. Still, the presidential-cycle tendencies are real, and they exist for a logical reason. Presidents like to take economic and political pain in their first year. By the third year, both Congress and the president are priming the pump in an attempt to induce popularity and win re-election.

Disclosure note: The author of this column is a registered Democrat.

(John Dorfman, chairman of Thunderstorm Capital in Boston, is a columnist for Bloomberg News. The opinions expressed are his own.)

To contact the writer of this column: John Dorfman at jdorfman@thunderstormcapital.com

Last Updated: August 9, 2009 21:01 EDT