If you’re breathing a sigh of relief that Barack Obama’s time as President of the United States is nearly over, you shouldn’t be. Or, at least, the investor part of you shouldn’t be. Obama’s eight years in office represent the fourth-best stock market performance by presidential term in U.S. history.
With three weeks still to go in his term, the return in the Dow Jones Industrial Average during Barack Obama’s time as President, which began on January 20, 2009, is 149% (see chart below). Only Calvin Coolidge’s five and a half years as President during the Roaring ‘20s (255.9%), Bill Clinton’s eight years (226.6%) and Franklin Delano Roosevelt’s 12-plus years digging out of the Great Depression (194.4%) have topped it.
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By annualized return, the stock market performance under Obama (18%) actually ranks second, behind only Coolidge’s whopping 25.5% average annual return. Obama’s annualized return is nearly four times the average annual return (4.7%) of a U.S. President.
The worst stock market performance by far came under Herbert Hoover, who presided over the Great Depression and the accompanying 1929 Stock Market Crash. Stocks fell 35.6% per year during Hoover’s tenure. The next-worst annualized return was a mere -3.5%, under George W. Bush.
Now, the finishing kick for stocks during Obama’s final couple months has clearly been the result of Donald Trump’s win on November 8 – the so-called Trump Rally. However, history says that fervor will subside; stock market returns under Republican Presidents (3% a year) are less than half of what they are under a Democratic regime (7%).
Of course, there have been plenty of exceptions to that rule. Coolidge, a Republican, is the standard bearer for market returns under a U.S. President. And Ronald Reagan ranks just behind Obama (135%) by overall Dow return. Conversely, Woodrow Wilson (-6.9%) and Jimmy Carter (-0.9%) were Democratic duds as far as Wall Street was concerned. The Hoover disaster is what really weighs Republicans’ historical stock market performance down.
It’s important to note that Obama took office just as stocks were hitting multi-year lows on the heels of the worst recession since the aforementioned Great Depression. Just like FDR, Obama benefited from the bounce-back—though, as many have with FDR, you could argue that he was largely responsible for facilitating it.
But I’d rather not get political on you. My intent is simply to provide numbers and context as they relate to presidential stock market performance; feel free to interpret that information however you’d like.
So does this mean we’re due for a market pullback under Trump? Not necessarily. Reagan, George H.W. Bush (+9.7% annually) and Clinton managed better-than-average returns all back to back, over the course of two decades. So did FDR, Harry Truman (8% annually) and Dwight Eisenhower (10.4%), and that was over nearly three decades. Stock market rallies can last for generations, cross aisles and survive times of terrible political turmoil like we have now. Though Wall Street prefers a Democrat in office, there have been many a bull market on the watches of Republican Presidents.
So, while it’s fair to celebrate the extraordinary stock market performance under Obama, you shouldn’t fear any sort of correction during the next four to eight years under President Trump—or at least not one that has to do with which political party is in office.
Timothy Lutts heads one of America’s most respected independent investment advisory services. Each week, Tim personally picks the single best stock in his exclusive Cabot Stock of the Week advisory. Build your wealth and reduce your risk with the top stock each week for current market conditionsLearn More