There’s been a lot of talk in the media about Trump’s effect on the rising stock market. This is alluded to his more lenient corporate taxation policies. Unfortunately this is counterbalanced by this conflict for import and exports for the US.
Because of this, I decided to take a look back to see how well the stock market performed under other Presidents.
Keep in mind that this is all for fun. And should not be misconstrued that Presidents necessarily provide a healthier market.
CORRELATION DOES NOT EQUAL CAUSATION
Just because that the stock market went up during a President’s term does not immediately mean that the President had something to do with it. Sometimes they’re just in the right place at the right time.
Using Yahoo!’s Historical data on the S&P 500, dating back to 1950, the stock market’s performance is shown below alongside the name of President who was in office during that time period.
Presidents vs Stock Market
From these charts, we can clearly see that Clinton had the best Stock Market performance. With a total return of 211.32% during his 8-year term. It just so happened that this was the era of the dot-com boom which resulted in high stock market gains. Whether or not Clinton was the cause of this or whether he just so happened to be at the right place at the right time is up for debate.
The Top 5 Presidents in ranking order would be:
- Bill Clinton – 211.32%
- Barack Obama – 175.93%
- Dwight D. Eisenhower – 134.19%
- Ronald Reagan – 129.62%
- Harry Truman – 54.72%
However, there are a few things to note about these charts.
First, some Presidents served a different number of terms than others. Some didn’t even serve a full term at all.
So it’s not fair to compare Clinton’s 8-year performance to some Presidents who did not serve the same amount of time.
Annualizing Stock Performance Data
Therefore, in order to standardize the performance tables, I annualized each President’s stock market performance using the formula:
(stock price beginning of term/ stock price at the end of term) ^ (1 / number of years served) - 1
The result was as follows:
- Harry Truman – 15.66%
- Bill Clinton – 15.25%
- Barack Obama – 13.53%
- Gerald Ford – 12.24%
- Dwight D. Eisenhower – 11.22%
Note: Harry Truman was annualized over a period of only 3 years, despite having served in office from 1945 to 1953, a period of 8 years. This was because Yahoo! Finance historical data only went back to 1950.
So far, the Stock Market has only done “okay” while Donald Trump is serving as President, with a whopping total performance of 21.80%, or 10.38% per year. He’s only been in the office for 2 years and the majority of his policies have been to reduce restrictions on businesses (mainly his) and reduce trade with international countries.
While Presidents do not directly affect Stock Market performance, they can have power to contribute fiscal policies to the economy, which indirectly affects the Stock Market. These policies are, however, lagging indicators as the amount of time it takes for a policy to pass through is tremendous. And by that time, their term may be near over.
The Federal Reserve controls the other half of the puzzle with decisions over monetary policies. Together, monetary and fiscal policies both can stimulate and/or restrict the economy. These are more major factors which affect the Stock Market.
I would, however, dare to say that Trump’s initial tax cuts had very promising futures for the stock market and for businesses, as many reported higher earnings as a result of accounting changes to their financial statements.