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, IV and V 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%)
#16 President Gerald Ford (10.8%)
#17 President Dwight D. Esienhower (10.9% per year)
#18 President George H.W. Bush (11% per year)
#19 President William McKinley (11.3% per year)
#20 of 22
President Barak Obama, Democrat
Market Performance: 13.8% per year
Term: January 20, 2009 – January 20, 2017
Election Year: 2008 and 2012
President Barack Obama took office in the midst of the Great Recession, which officially lasted from December 2007 until June 2009. The Great Recession was fueled by a number of causes, such as the housing bubble in 2006 and 2007, then succeeded by the subprime mortgage crisis in 2007 and 2008; it hurt American households and the financial sector especially hard. One of President Obama’s first acts was signing the American Recovery and Reinvestment Act of 2009. The act aimed to help the country out of its deepening recession.
Critics suggest that President Obama benefited from timing; he took office just as the Great Recession was nearing its end meaning there was nowhere for the market to go but up. With positive returns for the S&P 500 during every year of his presidency, 6 out of 8 of these years in double-digits, it’s easy to see why he is ranked so high
#21 of 22
President Bill Clinton, Democrat
Market Performance: 15.2% per year
Term: January 20, 1993 – January 20, 2001
Election Year: 1992 and 1996
President Bill Clinton presided over one of the most exciting and longest bull markets in history. It may not have been as long as the most recent 11-year bull market, but the gains were bigger. Consider the bull market run that saw the S&P 500 move from a low of 295.46 on October 11, 1990, and then rise to 1,527.46 on March 24, 2000 – an increase of 546% on a total return basis. Fueled by the dot-com boom of the 90s, investors saw the emergence of the internet and new technology companies which fundamentally reshaped the U.S. and world economies.
With gains in 7 out of 8 years during the Clinton presidency (2000 saw the S&P 500 lose 9.1%), there was a five-year run from 1995 to 1999 that saw annual returns of
- 37.2%;
- 22.7%;
- 33.0%;
- 28.6%;
- and 21.0%.
#22 of 22
President Calvin Coolidge, Republican
Market Performance: 26.1% per year
Term: August 2, 1923 – March 4, 1929
Election Year: 1924
The best President, as measured by the annual stock market performance, was so far out in front it causes you to do a double-take. President Calvin Coolidge saw average annual returns of 26.1% in his 5 ½ years in office, bringing the returns close to those of President Obama AND President Clinton’s years combined.
President Coolidge presided over the boom years called the Roaring Twenties. President Coolidge left office just as the party was ending, about six months before the Great Crash of 1929 ushered in the Great Depression.
Whether it was luck or not, the fact is that the DJIA soared to an astonishing 266% during his presidency.
