Former President Bill Clinton speaking in 2023. The stock market's average annual return during his ... [+]
As of December 27, Joe Biden ranks ninth among U.S. presidents (post 1928) in stock-market performance. That’s not likely to change in the last few days of his term.
Bill Clinton remains the champion, with a 17.49% annual return for the Standard & Poor’s 500 Total Return Index during his presidency in January 1993 to January 2001. He managed to balance the federal budget (with help from the Internet boom), and to avoid major wars and recessions.
President-Elect Donald Trump, in his first term, saw the stock market return 15.95% per year. As he likes to point out, he was doing even better until the Covid-19 pandemic threw a wrench into the economy.
Trump ranks third in stock-market performance, behind Barack Obama at 16.25%, and ahead of Gerald Ford at 15.57%.
Under Biden, stocks have returned an average of 13.49% per year from January 20, 2021 through December 27, 2024. That puts him comfortably ahead of tenth-place President Jimmy Carter (12.40%). But he is unlikely to catch up to eighth-place finisher George H.W. Bush who presided over a 14.71% return.
My tally goes back to the inauguration of Herbert Hoover in 1929, and covers 16 Presidents. I didn’t go back further in history because I wanted to use the Standard & Poor’s 500 Total Return Index as my gauge, and it didn’t exist earlier. Figures are total returns including dividends and capital gains.
Three With Losses
Three Presidents saw the stock market decline during their terms. Stocks fell 0.64% per year with Richard Nixon at the helm, and 3.82% per year when George W. Bush was President.
Herbert Hoover served at the beginning of the Great Depression, and saw stocks fall 30.82% per year from his inauguration in 1929 through the end of his term in January 1933.
Of these three Presidents, two served only a single term. Nixon was reelected in 1972 but had to resign in August 1974 because of the Watergate scandal.
Democratic Heroes
Occupying the 11th through 13th spots on the stock-market performance tally are three gods in the Democratic Party pantheon, Franklin D. Roosevelt (12.15%), Lyndon Johnson (11.23) and John Kennedy (9.82%).
Roosevelt, of course, had to content with the Great Depression. Johnson’s term was marred by heavy casualties in the Vietnam War and public division about the war. Returns under Kennedy were dampened by the Cuban missile crisis, a steel strike and a “flash crash” in 1962.
Party Politics
Each party, naturally, claims that prosperity is more likely when it is in charge. In the stock market, the record doesn’t give a clear edge to either.
Three of the top five Presidents, in stock-market performance, were Democrats. But five of the top eight were Republicans. (Dwight Eisenhower ranked sixth with an annualized return of 15.51%, Ronald Reagan seventh at 15.08% and George H.W. Bush eighth with 13.71%).
Three Republicans occupy the lowest rungs on the ladder. But five of the bottom eight were Democrats.
Presidential Cycle
According to conventional wisdom, the first two years in a Presidential term are weak. If there’s going to be a recession any time in his or her term, the President will want to get it out of the way fast.
Conventional wisdom also says the third year of the Presidential term is usually the strongest. This is when the president and Congress and trying to “prime the pump” for prosperity going into the next election season.
That view of the so-called Presidential Cycle seems largely true. According to a study by Carson Investment Research (using FactSet data for 1950 through 2023), the S&P 500 has averaged 7.9% % in year one, 4.6% in year two, 17.2% in year three, and 7.3% in year four (the next election year).
Trump Redux
President-elect Trump will assume office at a time when stocks are highly valued, with the average stock selling for about 24 times earnings. Historically, a typical multiple would be more like 15. That will make it harder for him to run up big stock-market returns.
The stock market is likely to applaud Trump’s policies of lower taxes and lighter regulation. But I think it may balk at his proposed tariffs and immigration restrictions.
In my opinion, tariffs retard economic growth, as was shown by the country’s experience following enactment of the Smoot-Hawley tariffs in 1930.
Tighter immigration rules and mass deportations, if enacted, will cause labor shortages in selected industries, I believe. Health care, agriculture and home building may be especially vulnerable.
Check back in January 2025 to see whether President Trump has improved his third-place standing or whether he declines in the ranks.
