If you’re breathing a sigh of relief that Barack Obama’s time as President of the United States is now 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.
Obama’s Historical Stock Market Performance
The return in the Dow Jones Industrial Average during Barack Obama’s time as President, which began on January 20, 2009, was 150%. 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.
By annualized return, the stock market performance under Obama (12.3%) actually ranks third, behind only Coolidge’s whopping 25.5% average annual return and Clinton’s 15.9% average annual return. Obama’s annualized return is nearly three times the average annual return (4.7%) of a U.S. President.
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Now all Donald Trump has to do is match it! If he does (and this is if Trump gets re-elected in four years), the Dow would rise to 50,000 points by 2025. Think about that possibility for a second.
Easier said than done, of course; but not completely impossible. In fact, there’s precedent for back-to-back presidential terms with historically great stock market performance. Ronald Reagan (135% return over eight years), George H.W. Bush (45% over four years) and Clinton managed better-than-average returns all back to back, spanning two decades. So did FDR, Harry Truman (81.7% over eight years) and Dwight Eisenhower (120.3% in eight years), 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.
And lest we forget, the finishing kick for stocks during Obama’s final couple of months has clearly been the result of Donald Trump’s win on November 8. So far, investors seem to like Trump.
One potential fly in the ointment is that stock market returns under Republican Presidents (3% a year) are less than half of what they are under a Democratic regime (6.7%).
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 Reagan ranks just behind Obama by overall Dow return. Conversely, Woodrow Wilson (-6.9%) and Jimmy Carter (-0.9%) were Democratic duds as far as Wall Street was concerned. Herbert Hoover’s disastrous four-year term (-82.8% from March 1929 to March 1933) is what really weighs Republicans’ historical stock market performance down.
On the flip side, 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 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.
New Bull Market Should Help Trump
While it’s true that Wall Street prefers a Democrat in office, there have been plenty of bull markets on Republican Presidents’ watches. And a new bull market does appear to be upon us.
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. And if you really dare to dream, the Dow Jones Industrial could be knocking on the door of 50,000 eight years from now.
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