The Stock Market's favorite benchmark produced its highest returns ever following a a U.S. Presidential Election. But what, if anything, did the President have to do with it?
In a word, probably nothing. Investors want to pin the success or failure of the markets on Presidents, but it is not backed by hard evidence. One of the most common debates about Presidents and the economy is whether Republicans are better for the stock market than Democrats. History offers interesting data in regards to this.
After 12 years of Republican control of the White House under Ronald Reagan and George H. W. Bush, Bill Clinton presided over the most prolific gains in the modern history of the stock market. During the Clinton Administration, the S&P 500 increased 211%. The next best performance during a complete modern Presidency was during the immediate recovery from the financial crisis of 2007-2009, under Barack Obama when it increased by 175%. Unfortunately for George W. Bush, he presided over the worst market collapses in modern times, triggered first by the Dot Com bubble bursting and 911, and the greatest financial crisis since the Great Depression. As a result, investors in the S&P 500 actually lost 39% during the 8 years of his presidency.
Does this mean that the markets like Democrats? This is an age old debate that is not supported with any tangible facts. Bill Clinton benefited from extraordinary advances in technology, including the internet, and Barack Obama benefited from the first ever intervention in the markets by the Federal Reserve and its stimulative bond buying and ultra-low interest rate policy. Following the 2007-2009 financial crisis, the market went on a nearly uninterrupted run of double digit returns, which continued during the Donald Trump administration, when the S&P 500 increased 63%. There is strong evidence that continuing Federal Reserve intervention and the maintenance of ultra-low interest rates has kept the stock market party rolling over the last 12 months since Joe Biden was elected.
Whatever your beliefs, the dark side of presidential economics is the explosion of our National Debt. When Bill Clinton became President in 1992, the National Debt was $4.065 trillion. It was kept mostly in check through his presidency due to the extraordinary economic growth largely fueled by technological advances. When George W. Bush entered the White House in 2000, the debt had reached $5.6 trillion, and throughout the Bush, Obama and Trump presidencies, we saw the debt increase to over $28 trillion. Today, it is rapidly closing in on $29 trillion and counting. All of the modern Presidents can take responsibility for this.