U.S. Presidents and Comparative Stock Market Performance

Using Dow Jones Industrial Average ("DJIA") data back to 1900, a comparative analysis is performed using stock market performance throughout twenty different presidential tenures in the United States.

Cumulative stock market performance between U.S. presidential elections

Introduction

While there is some debate on how much presidents in the U.S. can impact the stock market and economy, it is certainly something that can be measured. Leading a country as large and diverse as the U.S. is a bit like steering an oil tanker, changes in direction and speed take time. However, the stock market is forward looking and reacts quickly to change, such as a new president.

Even though a president does not have a magic wand (although Twitter may be challenging this) to impact the market directly, the political tone at the top drives change. To use a recent example, the decrease in corporate tax rates had an immense impact on the stock market and corporate valuations.

Ultimately, despite the stock market being just one of an innumerable metrics of presidential performance, it is an important one and the U.S. leader has a degree of accountability, good or bad.

"Fair" Measurement

So, how might stock market performance be fairly measured? There are certainly considerations such as whether a new president inherits a "good" economy or a "bad" economy but these determinations can be difficult to objectively quantify at best and can be supremely bias at worst.

To remain objective (and, frankly, that means to merely provide an analysis with minimal assumption that would be ripe for politically subjective commentary), only a president's starting date and ending date of tenure are compared against DJIA performance.

Elections Versus Inaugurations

It may be a dumb question... but when does a president really become a President? When it comes to the stock market, which, in theory, immediately prices new information, that day may not be during the inauguration when the previous commander-in-chief hands over the keys to the White House and sets off into the sunset to write books, take up painting, or start a new partnership with Netflix.

For a forward-looking indicator like stocks, it makes more sense to use the election day as the starting point and ending point for tenure. Ultimately, candidates campaign endlessly and CEO's and investors have some wits about them to make a judgement call about the potential impacts of a new administration. A lot of those expectations are priced in before that election night but when those final results eventually come in there is no more guesswork in predicting a winner.

On the morbid side of things, in the case a president does not make it to the next election, due to death or resignation, the new president's tenure for measurement begins immediately.

Comparing All Twenty

At the beginning of this article, the results of the aforementioned methodology are visualized. Each new president, beginning with Theodore Roosevelt in 1901, begins with one dollar invest in the DJIA. The result is a comparative spaghetti plot with the previous nineteen presidents and current president ranked by performance on the right-hand side after 2000 trading days, or for as long as their tenure lasted.

Since spaghetti tends to be messy, Donald Trump's performance thus far in his tenure is highlighted in a bold black line.

Visualizing a Full Tenure

Since, Franklin D. Roosevelt's tenure would completely ruin a full-tenured horizontal axis on the first chart, hence the 2000 trading day limit, a scatter plot provides a useful alternative to compare total performance.

Stock market performance between U.S. presidential elections since 1900

Since this chart is a little less extravagant than the first one, we can also consider performance between inaugurations instead of elections. With only a few exceptions, the results are so similar they aren't worth visualizing. However, a few stand out:

  1. Calvin Coolidge has the best performance of all Presidents as measured by time in office (between inaugurations) as the market continued to climb after Herbert Hoover's election victory
  2. Whether or not Herbert Hoover gets that additional boost after his election or is counted just while in office, his performance in either case is abysmally bad (i.e. the Great Depression)

Key Results

  • The stock market since Donald Trump's election has done very well. As of May 15, 2019, which covers 631 trading days of performance, his performance of +39.9% puts him in fourth place thus far, behind leader Franklin D. Roosevelt at +70.5% and just above George H.W. Bush at +39.7%. That's pretty incredible given the market was only -1.6% from its all-time high on his election night versus the market being -83.8% from its all-time high when Roosevelt was elected. Other notable performers at Trump's point in tenure include Calvin Coolidge (+60.2%) and Dwight D. Eisenhower (+54.9%). This, of course, won't predict if Trump will finish higher or lower. Herbert Hoover saw the market rise +46.2% in the 243 trading days from his election day!

  • If one chooses the election day as the starting point for measurement, then Bill Clinton has the best performance since 1900. However, if measuring time between inaugurations, Calvin Coolidge has the best performance, as the market rose an absurd 22.5% between November 7, 1928 and March 3, 1929.

  • No matter how you cut it, Herbert Hoover is the "loser" and it's not even close. They don't call it the Great Depression for nothing!

  • Only four Presidents have had ended their tenure with a loss. They are:

    1. Herbert Hoover | -75.2%
    2. Richard Nixon | -17.3%
    3. George W. Bush | -14.9%
    4. Jimmy Carter | -2.0%
  • Barack Obama's performance is highly dependent on the measurement period due to the timing of the Great Recession. While the stock market dropped significantly following between his election and inauguration, he still holds the sixth best stock market performance among U.S. presidential elections. However, if his performance starts with his inauguration, which was shortly before the market bottom in March of 2009, he has the fourth best performance between presidential inaugurations.

Conclusion

Ultimately, stock market performance is just one measurement of a President's time in office and it may only be a coincidental measurement. As can be said about many things in life whether Presidents or average people, they often deserve less praise for good performance and less blame for bad performance.

There are so many other factors to consider when judging the "success" of a Presidential tenure. Luckily for us, there are many more financial and economic measurements to take a look at, coincidental or not. So, keep an eye out for more analysis using this approach!


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