Wednesday, June 23rd, 2021

Which President Was Best for the Stock Market?


The stock market has hit a historic high. As usual, the president and party in power take credit for good stock market performance and typically find reason to blame the other party if market performance is bad. Trump is taking credit for this rally. How does that square with history? Which president was best for the stock market over the years? And now does first year performance predict the rest of the president’s first term or even a second term? CNBC comes to our aid with an interactive graph that shows market performance by president for months in office. It goes back to Truman.  You can see how Trump compares to past presidents’ performances.

The economy has added roughly 1.8 million net new jobs since last December, the Bureau of Labor Statistics reported Friday. And with equities hitting new highs, the stock market has risen some 20 percent since he took office, as measured by the S&P 500 index.

But compared with other U.S. presidents, stock market gains during Trump’s first year, while solid, aren’t the biggest advances under the previous 12 occupants of the Oval Office.

If we set their graph for the maximum 95 months in office for an eight year term, the presidents rank as follows, best to worst.

Clinton: up 200%
Obama: up 160%
Eisenhower: up 120%
Reagan: up 100%
Truman: up 80%
Bush II: down 40%

Over their first four years here are the results:

Eisenhower: up 80%
Clinton: up 70%
Obama: up 65%
Bush I: up 55%
Johnson: up 35%
Carter: up 25%
Reagan: up 15%
Nixon: up 15%
Truman: Up 5%
Bush II: down 10%

But to compare Trump with the rest we need to look at just the first year in office:

Truman: up 30%
Obama: up 30%
Trump: up 20%
Bush I: up 20%
Johnson: up 20%
Kennedy: up 15%
Ford: up 12%
Clinton: up 10%
Eisenhower: down 2%
Nixon: down 10%
Reagan: down 12%
Carter: down 12%
Bush II: down 15%

Trump comes in number three for his first twelve months, following Truman and Obama. The market under Truman lost ground in his next three years in office but ended up 80% at the end of his second term. The market under Obama was up 65% as his first term ended and up 160% at the end of his second term to come in second after Clinton. During the Clinton presidency the market was only up 10% at the end of a year but up 70% at the end of his first term and up 200% for first place when he left office.

What Is an Options Trader to Do?

How do we read the market just considering the gains in the first Trump year? We can use Truman, Obama, Bush I and Johnson as guides. They all did as well or better than Trump during their first year. Under Obama, Johnson and Bush I the market kept going up but under Truman the country entered a recession and the market went down. The best long term market was under Clinton but his first year only showed a 10% gain. Perhaps this information simply shows the value of stock options as a hedge against the inherent uncertainty of the stock market under any and all presidents.

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