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.
Parts I, II and III: #1 – #12
Parts I, II, and III brought us this list:
#1: President Herbert Hoover (-30.8% per year)
#2: President George W. Bush (-5.6% per year)
#3: President Grover Cleveland (-4.9% per year)
#4: President Richard Nixon (-3.9% per year)
#5: President Benjamin Harrison (-1.4% per year)
#6: President William Howard Taft (-0.1% per year)
#7: President Theodore Roosevelt (2.2% per year)
#8: President Woodrow Wilson (3.1% per year)
#9: President Franklin Roosevelt (6.2% per year)
#10: President John Kennedy (6.5% per year)
#11: President Jimmy Carter (6.9% per year)
#12: President Warren Harding (6.9% per year)
Ranking from Worst to Best (#13 – #16)
#13 of 22
President Lyndon B. Johnson, Democrat
Market Performance: 7.7% per year
Term: November 22, 1963 – January 20, 1969
Election Year: N/A
President Lyndon B. Johnson, popularly referred to as LBJ, assumed the presidency following the assassination of President Kennedy in 1963. He is most often remembered for the escalation of the Vietnam War and significant social unrest throughout the country during his presidency.
Many economic historians consider LBJ favorably because of his domestic policies, including his War on Poverty efforts, expansion of civil rights, and the establishment of Medicare and Medicaid.
While the stock market turned in a healthy 7.7% per year, the cost of the Vietnam War caused inflation to move higher, eventually leading to the stagflation (high inflation, low growth, high unemployment) periods that plagued the presidencies after LBJ’s
#14 of 22
President Harry S. Truman, Democrat
Market Performance: 8.1% per year
Term: April 12, 1945 – January 20, 1953
Election Year: 1944 and 1948
President Truman ascended to the presidency after the death of President Franklin Roosevelt. He’s best known for ending World War II by dropping the atomic bombs on Hiroshima and Nagasaki and installing the Marshall Plan which helped rebuild Western Europe and leading the U.S. into the Korean War.
Domestically, Truman’s presidency saw the start of the post-World War II surge in U.S. prosperity. This was not without challenges, especially as the end of Truman’s presidency was marked with union strikes and rising consumer prices, leading to higher inflation.
Nevertheless, stocks averaged an 8.1% annual return during the Truman years.
#15 of 22
President Ronald Reagan, Republican
Market Performance: 10.2% per year
Term: January 20, 1981 – January 20, 1989
Election Year: 1980 and 1984
The beginning of Regan’s presidency can be summarized by a 1983 Time Magazine cover article emblazoned with the headline: The New Economy — as the economy transitioned from industrial to technology during the Reagan presidency and during that time one of the greatest bull markets in history took root.
One of Reagan’s economic pillars invokes passionate debate as
“Reaganomics” is one of Reagan’s economic pillars that involves passionate debate. The policy’s corresponding tax cuts, deregulation, less government spending and pro-business policies are healthily debated among economists.
Reagan came into office with inflation running high and his Fed Chair Paul Volker is generally credited with taming inflation with tight monetary policy. Their policies helped reduce inflation from 12.5% to 4.4% and bring real GDP to an annual growth rate of 3.6%.
When he left office in 1989, his approval rating was 68%, among the highest of any president. His 10.2% annualized returns during his time in office surely had something to do with that.
#16 of 22
President Gerald Ford, Republican
Market Performance: 10.8% per year
Term: August 9, 1974 – January 20, 1977
Election Year: N/A
President Ford was never actually elected Vice President or President, as he took over as vice president for the resigning Spiro Agnew and later took over when President Nixon resigned.
President Ford took over during high inflation and slow growth times and at the tail-end of the punishing 1973-1974 bear market which pushed the S&P 500 and DJIA to drop by about half. Economic historians generally credit the respectable 10.8% annualized market returns during the Ford years more in part to the fact that the market was coming off of a low position versus anything President Ford did or didn’t do.
