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, III and IV brought us this list: #1 – #22
#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)
#13 President Lyndon B. Johnson (7.7% per year)
#14 President Harry S. Truman (8.1% per year)
#15 President Ronald Reagan (10.2% per year)
#16 President Gerald Ford (10.8% per year)
Ranking from Worst to Best (#17 – #19)
#17 of 22
President Dwight D. Eisenhower, Republican
Market Performance: 10.9% per year
Term: January 20, 1953 – January 20, 1961
Election Year: 1952 and 1956
Dwight D. Eisenhower, also known as Ike, became a 5-star General in the Army and served as the Supreme Commander of the Allied Forces in Europe during World War II.
Eisenhower experiences many firsts in his presidency, including the establishment of NASA, the Interstate Highway System and the Civil Rights Act, which was signed in 1957. In terms of economics, his policies encouraged the booming U.S. economy, as the U.S. was the only major world superpower that emerged from World War II without significant rebuilding needs.
Despite presiding over the Recession of 1958 – also known as the Eisenhower Recession – which lasted 8months, the S&P 500 recorded an annual gain of 10.9% each year.
#18 of 22
President George H.W. Bush, Republican
Market Performance: 11.0% per year
Term: January 20, 1989 – January 20, 1993
Election Year: 1988
George H. W. Bush (who died November 30, 2018) served only one term after losing his reelection bid to Democrat Bill Clinton. Yet, when measuring his presidency by stock performance, his was among the best.
Many historians suggest that Bush inherited a strong stock market and booming economy from Ronald Regan. In many respects, that’s true, although Bush ranks higher on the list relative to Reagan.
For the most part, the U.S. economy was performing well after the recession in 1982, but it did slip into another recession in 1990, where unemployment went from 6% to close to 8%. In this time the federal deficit increased dramatically, tripling since the early 80s. The performance of the stock market was a bit lumpy during his four years too, with returns of:
- 32% in 1989;
- -3% in 1990;
- 30% in 1991 and
- 8% in 1992.
#19 of 22
President William McKinley, Republican
Market Performance: 11.3% per year
Term: March 4, 1897 – September 14, 1901
Election Year: 1896 and 1900
William McKinley’s position on this list may come as a surprise to most, as the majority of the presidents with the highest stock market returns are from more recent times. Yet, McKinley’s presidency was known as a time of rapid growth in the U.S. and exceptional stock market returns.
Many historians will suggest that stock market investors enjoyed such hefty returns during the two-terms McKinley served (which were cut short by his assassination in 1901) due to the devastating depression that ended prior to his election, but his domestic policies favored American manufacturers and factory workers. He passed the 1897 Dingley Act and helped pass the Gold Standard Act as well.
