Stock market performance by presidential administrations
It is leap year and Wall St. is having its usual discussion of which candidate will be better for the stock market. I do not know, but it is interesting to look at the historic record. Starting with Truman makes a good comparison as Republican and Democrats have served almost the same number of years and it covers all of the post WW II era. Moreover, each party has an admiration with two presidents –JFK & LBJ and Nixon & Ford. In addition, each has one president that only served for four years and lost their bid for a second term.
So this comparisons shows that the average annual stock market gain under Republican has been 7.3% while under Democrats it has been more than double that at 14.9%.
The primary reason for this were the two republican presidents where the S&P 500 actually was lower when they left office than when they took office. In modern times only three presidents suffered a falling market over their entire term–Hoover, Nixon and the second Bush. On the democratic side, they have the president with the largest average returns – -Clinton. Maybe the question should be, can Hillary repeat her husband’s record?
As a robustness test: What do you get if you exclude the first and last year of the president’s term?
Not that I think much of Bush II, but I would have trouble making a case for the timing of both his recessions really being a meaningful measure of his policies.
The market was only above its starting point for about 21 months for Bush. That was about the 6th & 7th years of his term. The high point for Bush was 115% of the starting point at the peak before it fell to 65% at the end. Looking at a chart of his term he clearly shows a very poor record most of his term. It reminds me of the chart of employment over his 8 years of office that almost ended right where it started. He was down in both the first and last year in office but I do not think that really distorted his record.
Reagan had a big 25% bear market in the 7th year before rebounding strongly in the final year. Obama has been flat for the last year or so and Clinton had about a 10% correction in the final month of his term. Overall, a first glance at the data does not show any examples of the first or last year creating major distortions.
Bush the Second was having a nice recovery after the 2001 recession. Then the Democrats won the House and Senate, and the S&P500 took a turn for the worse. Clinton, of course, had a Republican Congress for his last six years, as has Obama.
Maybe, but the market record does not agree.
It fell for the first two years of the Bush term to a level about a third below
where it was when he took office and not that far from its level at the end of his presidency.. Then it started rising for the next four to five years. This would suggest the Dems taking control was what caused the market to rise. I suggest you take another look at the data.
What you are saying, Warren, is that Democrats make good leaders. Republicans make good followers.
I’m saying that control of Congress is more important than control of the White House.
Control of congress does have an influence on economic growth. And as explained here , the economy grows faster with democrats in control of the congress with both republican and democratic presidents.
As summarized in the reference article,
“To summarize – among Presidents from 1929 to the present, Democrats produced faster economic growth than Republicans with quite a margin to spare. Additionally, both Democrats and Republicans in the Oval Office were more likely to produce faster economic growth the greater the percentage of years in their term that the Democrats controlled Congress. ”
– See more at: http://angrybearblog.strategydemo.com/2010/06/economic-growth-rates-presidents-party.html#more-3284
“Maybe, but the market record does not agree.
“It fell for the first two years of the Bush term to a level about a third below
where it was when he took office and not that far from its level at the end of his presidency.”
Right. The first was the 9/11 drop, and the second the “Democrats have taken over Congress” drop.
“Control of congress does have an influence on economic growth. And as explained here , the economy grows faster with democrats in control of the congress with both republican and democratic presidents.”
I will not dispute that. But the issue was the stock market. And we all know that the stock market can be doing very well even when the economy is not.
Taking Warren’s data as given without bothering to verify it, the conclusion would be that Democratic control is better for the economy in general, but Republican control is better for people who own stock.
Well, Warren, if you want to cherry pick short term data points, you can find periods where the economy was not doing well, yet the stock market was. However in the long term,
“… equity valuations and earnings have both grown at roughly the same pace as nominal GDP. This makes intuitive sense… ”
http://econompicdata.blogspot.com/2015/04/is-there-relationship-between-economy.html
Certainly, Jerry. Economic growth is, necessarily, the forcing function of stock prices. However, there is a lot of variability around that forcing function.
Warren, you said this: The first was the 9/11 drop, and the second the “Democrats have taken over Congress” drop. –
Never bothered by the facts are you, the dems took over congress two years after Bush took office and that was when the market bottomed and started a multiyear rally.
Like I said before, go back and take a look at the data before you keep demonstrating your ignorance, or maybe it is just an ability to read a calendar.
Warren just for you info when describing the Bush economy:
1. employment did not bottom until 38 months into his term in office.
2. employment did not get back to where it was when he took office
until 48 months, or the end of his first term
3. at its highest point it was 4.2%above it level when he took office.
This is by far the worse record on anyone but Hoover.
3. at the end of 8 years, employment was 0.4% above
where it was when he took office and was falling sharply.
This is by far the worse record of anyone but Hoover.
Yet you claim he was having a nice recovery.
I can quote the real GDP data if you want that shows the same pattern
of the weakest economic expansion on record. Yes, Obama has done better.
spencer:
You got it right.
According to Wikipedia Republicans controlled the House and Senate from 1995 to 2007.
So while Warren is not entirely wrong, he is also effectively equating the housing bust and fiscal crisis to Democratic control of Congress.