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How Political Affiliations Affect Financial Expectations

Individuals in counties that tend to vote Republican are becoming more pessimistic about their financial futures than individuals who live in counties that tend to vote Democrat, according to data released by the Federal Reserve Board of New York.

The data attempts to analyze how politics affects the financial expectations of consumers. Prior to the 2016 presidential election, Democratic counties tended to be more optimistic about their financial futures than Republican counties. All that changed in November 2016, when Donald Trump was elected president. For the nine months after the election, Republican counties became the more optimistic ones, even though the report notes that both Republican and Democratic counties both became more optimistic after the 2016 election.

However, in the past few months, Republican counties are regressing back to their pre-recession levels, according to the data. What’s also interesting is that this trend is not specific to the 2016 election. Looking back on previous election cycles, Republican counties tend to be get more optimistic immediately after the election is over.

From the researchers:

We hypothesize that the expectations consumers report in surveys may consist of two parts: true beliefs (on which they base their economic decisions) and some noise. If presidential election outcomes predominately affect the noisy component, we would expect polarization in reported expectations but no substantial divergence of behavior. Over the past twenty years, presidential elections have increasingly caused polarization in consumer expectations.

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