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Jul 22, 2020 - Economy & Business

Presidents don’t have much effect on the stock market

Felix Salmon
Note: Chart shows total return of the Russell 3000 index with Jan. 1, 1979 = 100. Growth rate is calculated as the compound annual growth rate over the 4 or 8 years from inauguration. Data: Factset; Chart: Danielle Alberti/Axios
Note: Chart shows total return of the Russell 3000 index with Jan. 1, 1979 = 100. Growth rate is calculated as the compound annual growth rate over the 4 or 8 years from inauguration. Data: Factset; Chart: Danielle Alberti/Axios

President Trump has been good for the stock market — but not as good as most of his predecessors.

Why it matters: Americans with substantial wealth tied up in stocks have an incentive to vote for the candidate who will be best for their portfolio. Presidents don't have a huge effect on the stock market, but overall Democrats have outperformed Republicans in recent history.

By the numbers: Stocks have risen by an annualized 13.7% over the course of the Trump administration, if you look at total return with dividends reinvested. That's a very healthy performance, but it still lags Reagan (14.1%), George H.W. Bush (15.1%), Obama (16.5%), and Clinton (16.7%).

  • Only George W. Bush oversaw a worse performance for the stock market than Trump in modern times, because Bush was the president in office during the global financial crisis.

A 2004 Federal Reserve study of the 1927-98 period found that "neither risk nor return varies significantly across the presidential cycle."

Be smart: Correlation is not causation, and most presidents sensibly try to take neither credit nor blame for stock-market performance.

Our thought bubble: The bull case for Trump is that he would continue to implement low-tax policies that are favorable to big business. The bull case for Biden is that he would use fiscal policy to ensure higher employment and income for the bottom 90% of consumers — which in turn would drive stronger economic growth.

The bottom line: It's impossible to know which man would be better for stocks, making this one of the rare issues that doesn't much help people who will decide between the candidates in November.

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