By William Watts
Like no president before him, Donald Trump used the stock market as a scorecard, arguing that sharp gains were a vindication of his economic stewardship.
Trump leaves office with U.S. major benchmarks near all-time highs. But how did his performance stack up with his predecessors?
Not too bad, according to major indexes. Based on annualized returns for the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.34% , the U.S. benchmark, Trump (+13.7%) saw the third-best performance of the 15 presidents who have served since 1929, according to Dow Jones Market Data. Trump, however, slightly trailed his immediate predecessor, Barack Obama (+13.8%). Bill Clinton (+15.2%) claims the top spot.
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.11% , the more popularly known blue-chip gauge, saw an annualized return of nearly 11.8% under Trump, versus 12.1% for Obama and 15.9% for Clinton. Calvin Coolidge, with the benefit of the Roaring ’20s, topped them all with a 25.5% annualized rise, based on data going back to the late 1890s.
Trump can claim some bragging rights when it comes to the tech-heavy Nasdaq Composite, which made its debut in the early 1970s. A 24.2% annualized rise is top of the list, with Jimmy Carter coming in second with a 19.6% gain.
Of course, there are reasons previous presidents shied away from tying their success too closely to the stock market. For one, the market is fickle. If you take credit for its rise, you’re likely to get only more blame if it falls.
The stock market is also a far from perfect gauge of the economy or how individual households feel about their own circumstances.
So what should investors read into the historical record? After all, many analysts have noted that no Democratic president has seen a decline in total returns over the course of his term.
Jim Reid, a strategist at Deutsche Bank, argued that might not offer much of a guide either way when it comes to the Biden presidency.
The question comes down to whether performance during Democratic administrations was down to skill in handling the economy or simply bad luck when it came to timing for some Republicans.
“For example, the U.S. had a Republican administration when the pandemic hit last year, the period between the peak of the dot-com bubble and the GFC (Great Financial Crisis) lows (George W. Bush.), when the 1973 oil shock occurred (Nixon), and during the Depression (Hoover),” Reid wrote.
Biden, meanwhile, inherits an economy still struggling to recover from the COVID-19 pandemic and a stock market that many investors see as priced for perfection if not in bubble territory. Stocks have rallied, however, since Biden’s November election victory in part due to expectations he will push through aggressive stimulus measures.
And the new presidential term began with a bang, as the Dow, S&P 500 and Nasdaq all finished at record highs and logged t he best Inauguration Day performance since Ronald Reagan took the oath of office to begin his second term in 1985.