Creating a new Mount Rushmore based on the performance of Wall Street
When the nation elects a new president, it’s a moment where Washington D.C. and Wall Street converge. This is because Wall Street watches the outcome of elections closely, trying to figure out what it will mean for the stock and bond markets. There are lots of theories for what election results mean for the market. Some people think that Wall Street performs better when:
- A new president from a different party is elected;
- A president is re-elected to a second term; or
- There is a Republican/Democrat president.
Is there any proof of this? We ranked the best and worst presidents simply by the performance of the stock market in an attempt to settle the debate of what kind of election outcome is best for investors. While this sounds easy, there are a few big caveats to consider.
The Five Big Caveats
Caveat #1: The Office of the President was established in 1789 and since then America has had 45 different presidents. Three years later, Wall Street was officially founded on May 17, 1792 with the signing of the Buttonwood Agreement. However, there was no “stock market” in the sense that investors now know it, until the late 1800s. Because of this, it doesn’t make sense to include the first 22 presidents and the analysis starts with the election of 1888.
Caveat #2. When the Dow Jones Industrial Average was first published on May 26, 1896 and it followed the 12 largest companies in each sector, it now tracks 30. The other commonly-used index, the S&P 500, was introduced in 1957, but it does track data back to the late 1920s. This ranking uses the S&P 500 from President Hoover to the present and the DJIA for earlier.
Caveat #3. Returns do not include dividends. Over the last few decades, dividends have become a smaller component of total returns, so not including dividends will tend to favor more recent presidents.
Caveat #4. This data is not adjusted for inflation, which will tend to help presidents of inflationary times (Carter and Ford) and hurt presidents of deflationary times (Hoover and Bush).
Final Caveat. This one is sure to spark heated debate, but it seems fair to not include President Trump on this list simply because his presidency is still going.
Ranking from Worst to Best
#1 of 22
President Herbert Hoover, Republican
- Market Performance: -30.8% per year
- Term: March 4, 1929 – March 4, 1933
- Election Year: 1928
It’s no surprise that President Hoover would be the worst president in terms of stock market performance as he took office just a few months before the Stock Market Crash of 1929 that led to the worst bear market in history. It’s bad enough that Hoover presided over an annualized compound loss of 30.8%, but what’s worse is the astounding cumulative loss of 77.1%.
After his landslide win in 1928, Hoover said in his inaugural address that: “I have no fears for the future of our country. It is bright with hope.” But, just seven months later, on October 24, 1929, the world witnessed the beginning of the Stock Market Crash of 1929, when the DJIA dropped 13% in a single day.
#2 of 22
President George W. Bush, Republican
- Market Performance: -5.6% per year
- Term: January 20, 2001 – January 20, 2009
- Election Year: 2000 and 2004
While George W. Bush did not come into office after an incredible economic downturn like the Stock Market Crash of 1929 and the Great Depression. But, he did come into office after the Dot.com boom of the 1990s and presided during the September 11th terrorist attacks, the Iraq War and the 2008 mortgage crisis.
While there were some good years from 2003 through 2007, a fateful speech made in the New York Stock Exchange on January 31, 2007 deriding excessive executive compensation. And in less than a year, investors would experience one of the worst bear markets in history stretching from October 2007 through March 2009 when the S&P 500, DJIA and NASDAQ all lost more than 50%.
#3 of 22
President Grover Cleveland, Democrat
- Market Performance: -4.9% per year
- Term: March 4, 1893 – March 4, 1897
- Election Year: 1884, 1892
Stephen Grover Cleveland was the only president in history to serve two non-consecutive terms in office, serving as the 22nd and 24th president of the United States, (1885 – 1889 and 1893 – 1897). However, his second presidency is remembered for the third-worst in history, measured by stock market performance.
Cleveland’s second presidential term coincided with The Panic of 1893 that ran through 1897 – the end of Cleveland’s presidency. The Panic began with a railroad bankruptcy in February 1893 and resulted in over 500 banks closing, more than 15,000 business failing and unemployment hitting a high of 19%.
A deep recession that followed that hammered the banking system and, by many accounts, led to the realignment of the Democratic Party and the beginning of the Progressive Era.
#4 of 22
President Richard Nixon, Republican
- Market Performance: -3.9% per year
- Term: January 20, 1969 – August 9, 1974
- Election Year: 1968
President Richard Nixon is typically remembered for Watergate, his resignation from office and the Vietnam War. But, the stock market performed poorly diring the Nixon presidency as well.
The losses of 3.9% a year that his administration experienced are bad, but if you factor in high inflation the performance looks even worse.
Beyond poor stock market performance and other scandals, Nixon is also the president that abandoned the gold standard– which meant that the U.S. would no longer convert dollars to gold at a fixed value.
Nixon implemented a series of economic measures to help combat rising inflation– now called the Nixon Shock – that essentially killed the Bretton Woods system established in 1958.
The measures failed and the result was even higher inflation in the 1970s and one of the worst bear markets in history from 1973 – 1974. The period from January 1973 through December 1974 saw the DJIA lose about 45% of its value.
