The Inventory Market Loves Biden Extra Than Trump. So Far, at Least.

From the moment he was elected president in 2016 through his failed re-election campaign, Donald J. Trump cited the stock market as a report on the presidency.

The market loved him, said Mr Trump, and he hated Democrats, especially his opponent Joseph R. Biden Jr. During the presidential debate in October, Mr Trump warned of Mr Biden: “If he is elected, the market will collapse. ”In a variety of situations, he said that Democrats would be a disaster and that a victory would create“ a depression ”for them that would“ crumble ”the stock market.

So far it has not happened that way.

To the extent that the Dow Jones industrial average measures the stock market’s affection for a president, its early report states that the market loves President Biden’s first terms far more than President Trump’s.

Mr. Biden would get an A for this early period; Mr Trump would get a B for market performance in his early days as president, though he would get a higher grade for much of the rest of the term in office.

From election day to Thursday, the Dow rose 26 percent from 14 percent over the same period four years ago. Given the signs that the United States is making a swift recovery from the pandemic, the early returnees for Mr Biden’s actual tenure have also been exceptional. The rise in the stock market from its inauguration day close to Thursday’s close was the best start to a presidency since that of another Democrat, Lyndon B. Johnson.

For those too young to remember the terrible day of November 22, 1963, Johnson, the vice president, was sworn in as president that afternoon after President John F. Kennedy was assassinated in Dallas. If we measure the performance of the stock markets from the end of the day they all took office, we can include both Johnson and Theodore Roosevelt, who became president on September 14, 1901 after President William McKinley died of gunshot wounds.

The Republican Party has long claimed that it is the party of business and that Republican rule is better for stocks. However, historical record shows that the market has generally performed better under Democratic presidents since the beginning of the 20th century.

Overall, the market ranks third for all presidents during a comparable term since 1901 under President Biden. This comes from a balance sheet by Paul Hickey, co-founder of the Bespoke Investment Group, until Thursday (109th day of the Biden administration).

These are the top performers:

  • Franklin D. Roosevelt, inaugurated March 4, 1933: 78.1 percent.

  • Johnson, inaugurated November 22, 1963: 13.8 percent.

  • Mr. Biden, inaugurated on January 20, 2021: 10.8 percent.

  • William H. Taft, inaugurated March 4, 1909: 9.6 percent.

Note that three of the top four – Roosevelt, Johnson, and Mr. Biden – were Democrats. That fits an obvious pattern. Since 1900, the average stock market profit for Democrats at the beginning of their presidency has been 7.9 percent; for Republicans only 2.7 percent.

In contrast, the Dow rose 5.8 percent in Mr. Trump’s early days as president. That was a strong return for a Republican, but not quite able to sniff for a Democrat.

Updated

May 8, 2021, 5:12 p.m. ET

Now look at longer-term returns – how the Dow performed over the course of all presidencies from 1901 onwards. Again, the market fared better among Democrats, with an annual gain of 6.7 percent compared to 3.5 percent among Republicans.

With this metric, the Trump administration looks much better and ranks fourth among all presidencies.

These are the annualized returns for the senior presidents:

  • 25.5 percent under Calvin Coolidge, a Republican, in the twenties.

  • 15.9 percent under Bill Clinton, a Democrat.

  • 12.1 percent under Barack Obama, a Democrat.

  • 12.0 percent under President Trump.

That’s an extraordinarily good market performance under Mr. Trump if you remember that it includes the stock market collapse in late February and March last year when the world was hit by the coronavirus.

The market rebounded quickly when the Federal Reserve stepped in on March 23, 2020 and responded to the emergency relief programs passed by Congress. But neither the market, nor the economy, or the pandemic improved enough in 2020 to win President Trump for another term.

President Biden is undoubtedly benefiting from the uptrend in the economy and markets that began under his predecessor – just as President Trump benefited from the growing economy that President Obama left him with.

It doesn’t always work that way. In the Great Depression, the market roared for Franklin Roosevelt’s first 100 days. It offered a hopeful contrast – and a stark break – from its immediate predecessor Herbert Hoover, who led the worst stock market crash in modern history at the time. During Hoover’s four-year tenure, the Dow lost 35.6 percent on an annualized basis, by far the worst performing by any president.

The recent boom in the market can easily be explained. Back in July, I quoted an investment analysis that suggested that the stock market could do reasonably well in a Biden presidency, despite claims to the contrary by Mr Trump. These factors included more forceful and efficient management of the coronavirus crisis, which would fuel economic recovery and corporate profits. generous fiscal stimulus programs with the possibility of building a colossal infrastructure; Return to international engagement while reducing trade friction; and a renewal of America’s global commitments to climate change.

So far this analysis has continued. But will it produce strong returns from the Biden government?

I have no idea. Unfortunately, nothing tells us where the stock market is going. All we know is that in the long run it has risen more than it has fallen, but has moved fairly randomly day in and day out and has sometimes fallen into long falls. Another decline could happen at any time, regardless of what a president does.

The only approach to investing that I would actively use is passive: use inexpensive equity and bond index funds to build a well-diversified portfolio and stay long-term. And I would try to ignore the admonitions from politicians, especially those who would tie their own voting power to the performance of the stock market.

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