The 2024 Presidential election is just around the corner, and many investors are speculating about how a win for [insert candidate here] might impact the stock market. Will it be a boon or a bust? In this post, we’ll explore historical trends to understand how presidential administrations have influenced stock market performance.
Politicians often claim credit for stock market performance during their time in office. But can a president and their policies truly control the market? To answer this, let’s examine historical returns of the S&P 500 during various presidencies and see if any patterns emerge.
Historical Stock Market Performance
1993–2009: Clinton vs. Bush
Let's start by analyzing the stock market performance from 1993 to 2009, covering the presidencies of Bill Clinton and George W. Bush.
- Bill Clinton (1993-2001): Under Clinton, the S&P 500 averaged a remarkable 17.6% annual return. This impressive figure was largely driven by the tech boom of the late 1990s. During this bull market, much of the stock market’s performance was buoyed by speculative investments in technology that peaked at the end of his presidency.
- George W. Bush (2001-2009): Bush inherited the burst of the tech bubble, followed by the 9/11 attacks and the 2008 financial crisis. As a result, his presidency saw a challenging period for the stock market, with the S&P 500 averaging a negative 4.4% annual return.
These examples illustrate how external factors, and global events, can significantly impact stock market performance, often overshadowing the influence of the president.
Policy Impact: Reagan vs. Obama
Next, let’s compare two presidents with contrasting economic policies: Ronald Reagan and Barack Obama.
- Ronald Reagan (1981-1989): Reagan’s presidency was marked by “trickle-down economics,” including substantial tax cuts, reduced government spending growth, and deregulation. The S&P 500 averaged a solid 15.8% annual return during his time in office.
- Barack Obama (2009-2017): Obama’s presidency saw increased government spending, higher taxes, and ballooning government debt levels. Despite these changes, the S&P 500 averaged a 16% annual return under his leadership—almost identical to Reagan’s performance.
These figures challenge the notion that presidential policies directly determine stock market returns. Despite vastly different policy approaches, both administrations saw almost identical stock market returns.
Conclusion
The takeaway is clear: no single factor, including the presidency, solely drives stock market performance. Stock market returns are influenced by a complex interplay of factors including interest rates, supply and demand, economic indicators, international trade, geopolitical events, and corporate earnings. While presidential policies can have an impact, they are just one, very small, piece of the puzzle.