Which election result is better for the economy?
And which one for the stock exchange?
These questions come up regularly before important elections.
If you look for halfway objective criteria, you almost only have to look back to the past.
Because how the economy will develop can only be said with caution in advance.
It is almost impossible to forecast the development of the stock exchange.
Martin Hock
Editor in business.
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If one looks at the development since the start of the social-liberal government in 1969, the statement seems clear. Whenever the CDU was in government, things went better on the stock exchange. Especially when the FDP was also there. In the 16 years of Helmut Kohl's government, for example, the FAZ index achieved an annual average increase of 12 percent, and the black and yellow government led by Angela Merkel also achieved an annual average of more than 8 percent. Over the entire Merkel era, however, the result has shrunk to around 4 percent per year.
From this one could conclude that this would have been due to the participation of the SPD in government, especially since the results for governments led by it are even weaker. If the era under Helmut Schmidt continues to grow, the FAZ index under Gerhard Schröder has barely moved on balance and even posted a significant minus under Willy Brandt.
But this view is not entirely fair in several ways. It starts with the choice of time period. If you look back to the founding of the Federal Republic of Germany, it is just the first (pure) black-yellow coalition under Konrad Adenauer and later Ludwig Erhard, which comes off badly with an average minus of 6 percent. And in general, the stock market balance of the father of the economic miracle in his chancellorship is miserable with a minus of almost 9 percent per year.
On the other hand, if you look at the other end of the scale, you start to wonder whether a black-yellow coalition with the AfD would ultimately be best for share prices.
With an increase of more than 30 percent per year, the first decade of the Federal Republic performed best, when the CDU and FDP ruled together with splinter parties such as the “German Party” and the “All-German Bloc / Federation of Expellees and Disenfranchised”, i.e. parties that one would assign to the right-wing spectrum.
Second place goes to the first grand coalition under Chancellor Kurt Georg Kiesinger.
Does politics make the stock market?
But here, too, the comparison is not entirely fair. The data for the FAZ index in the archive of this newspaper go back to September 30, 1949, and so only the first ten days of the German post-war governments are missing. However, the FAZ index was fundamentally reformed in 1954 and 1961 and expanded from an initial 18 to 25 and later to the 100 values that are still valid today. Since the index values were only partially recalculated, there are deviations here. In this respect, the information on the performance before 1961 is to be understood as a very good approximation. Much more important, however, are various influences caused by the war, such as speculation about the equalization of burdens or the unbundling, which influenced share prices far more than economic development.
But above all, as is often the case with statistical relationships, the question of cause and effect must be asked. Was the stock market really bad because the Social Democrats were in government? Or were Social Democrats in government because the stock market, or rather the economy, was bad? Looking at growth and unemployment, for example, it can be seen that the growth rate declined almost continuously during the CDU-led years until 1969. During the first Adenauer years it was still around 9 percent on average, in the last Erhard and Kiesinger years it was less than 4 percent. The same applies to developments under the Kohl government, but also to Schröder.