Stock market performance under Donald Trump has been strong. But history says investors prefer a Democrat in office.
If you’re dreading what a Joe Biden win this November might mean for the stock market, you shouldn’t be. Or, at least, the investor part of you shouldn’t be. Contrary to popular belief, stock market performance is better under Democratic presidents than Republican ones. In fact, it’s not close.
According to Liberum, a U.K.-based investment bank, since 1947 the average annual return under Democratic presidents is 10.8%, versus a mere 5.6% return under Republican presidents.
The best stock market performance by a president in the post-World War II era came under Bill Clinton; the S&P 500 was up a whopping 210% in his two-term presidency, from 1993-2001. The second-best return under a U.S. president? That would be Barack Obama’s eight-year tenure, when the S&P was up 189% from 2009-2017.
Next up are a pair of Republican presidents: stocks rose 129% under Dwight Eisenhower (1953-1961) and 117% under Ronald Reagan (1981-1989).
Rounding out the top five is Democrat Harry S. Truman, who saw the S&P rise 87% during his eight-year term (1945-1953).
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Trump’s Stock Market Performance
How has Donald Trump fared? Pretty well, especially considering what’s happened in 2020.
Since his inauguration on January 20, 2017, the S&P 500 is up roughly 47%. That works out to just over a 1% per-month return, or equivalent to about a 96% return if he were to win re-election and serve two terms. That would place him fifth on this post-World War II list, ahead of Harry Truman but trailing Ronald Reagan.
Of course, context matters when it comes to U.S. presidencies.
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. Obama benefited from the bounce-back—though, you could argue that he was largely responsible for facilitating it.
On the flip side, President Trump has had the bad fortune of being in office when the worst global pandemic in more than a century forced Americans to stay home for months and the economy to plunge. One can debate how his handling of Covid-19 has impacted the economy and by extension the stock market (I’m not touching that one). But the coronavirus would have been bad news for any president, at least for a time.
It stands to reason that whoever wins in November will benefit from what will hopefully be a post-Covid world over the next four years – or at least part of the next four years. That could mean a post-recession bump for Joe Biden similar to the one he and President Obama enjoyed 12 years ago. Or it could mean an even better four years of stock market performance for Donald Trump.
And that’s really the point. Stock market rallies can last for generations, cross aisles and survive times of terrible political turmoil like we have now. Though Wall Street historically 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 impressive stock market performance under Trump, you shouldn’t fear any sort of market correction if Biden wins the election—or at least not one that has to do with a Democrat being back in office.
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!
*Note: This post has been updated from an original version, published in 2016.