Three Years After Donald Trump Was Inaugurated, Here’s How the Stock Market Has Performed Compared to Barack Obama’s First 3 Years in Office. The Results Might Surprise You.
The morning after Donald Trump was elected President, liberal economist Paul Krugman penned an emotional op-ed in The New York Times claiming that the U.S. stock market would “never” recover from Trump’s surprise victory. Krugman was wrong, of course. Three years later, stock market results have been largely strong under Trump, despite the massive market correction in the fourth quarter of 2018.
Krugman’s doom-and-gloom assertion was ill-advised, but somewhat understandable considering how badly stock market futures cratered the night of the election; at one point, Dow futures were down more than 800 points! But investors came to terms with a Trump White House much quicker than Krugman had forecast: stocks were actually up the first day of trading after the election. Despite a rough 2018, and even with things like impeachment and the ups and downs of the trade war with China, the net stock market results have been positive since Trump took office.
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A conservative-leaning friend of mine brought up Krugman’s wayward post-election assertion recently, scolding the economist for his obviously partisan bias in making such a bold claim in a publication as revered (at least by most) as The New York Times. So, in the name of balance – and keeping my own political leanings under full lock and key – I thought it might be interesting to compare Trump’s stock market results in his first three years as President (he was inaugurated January 20, 2017, three years ago almost to the day) to the same period after Barack Obama was sworn in in January 2009.
Here’s what I found in each of the three major U.S. stock market indexes:
Stock Market Results (first three years after inauguration)
Dow Jones Industrial Average
Those are some strong results under both Presidents. But stocks were stronger in Obama’s first three years – particularly growth stocks, as reflected in the near-doubling of the Nasdaq.
As with everything in the stock market, however, context matters. President Obama was elected in the midst of the worst economic downturn America has seen since the Great Depression, and he took office about six weeks before the market bottomed. Trump was elected amid almost universal U.S. growth: rising GDP, escalating home prices, and an unemployment rate (4.8%) that was less than half its late-2009 nadir (10%). So it’s far from an apples-to-apples comparison.
Regardless, the strong stock market performance since Trump’s election proves that the daily noise projecting Trump’s poisonous effect on stocks was not only overstated; it was simply incorrect.
Investors Ignoring Trump Drama
Wall Street has tuned out most of the drama surrounding Trump. The impeachment inquiry and the ongoing trade war with China have seemingly held stocks in check at times, but those events haven’t sent markets spiraling downward, and the tariffs have put a much bigger dent in Chinese stocks (and other emerging markets) than U.S. stocks – though the domestic impact of the trade war seemed quite profound the last three months of 2018.
In the aggregate, very little of Trump’s bluster has scared investors away. Wall Street is instead focusing on the bottom line: an unemployment rate (3.5%) at its lowest point in a half-century, earnings growth reaching six-year highs in 2018 thanks to lowered corporate tax rates, GDP growth holding steady, etc.
The bottom line is this: Wall Street doesn’t care about who’s President as much as we think it does. As long as the economy is improving, companies are growing profits, and people are working, stocks tend to go up. That was the case shortly after Obama took office in 2009 and the long post-recession recovery ensued, and it’s been the case the last three years with Trump in office.
So don’t invest based on who’s in the White House – now or a year from now, if the person occupying the White House changes. Buy stocks that you like, especially when times are good. And three whole years into Donald Trump’s presidency, times are very good on Wall Street.
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!
*This post was originally published in 2017 and is periodically updated.