So far, Biden leads all presidents in market performance

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So far, Joe Biden leads all US presidents in terms of stock market performance. We are only in the early days, of course; Biden has yet to serve a full year. And the market decline of November 26, if sustained, could change the numbers quickly. But until November 26, the Standard & Poor’s 500 index was up 20.74% under Biden (including dividends). Annualize that and you get a 24.84% rate of return.

Either the raw number or the annualized number would put Joe Biden at the top of the charts. Before Biden, Bill Clinton was in the lead, at 17.49% per year. Barack Obama finished second with 16.25% and Donald Trump third with 15.95%. For these calculations, I use the Standard & Poor’s 500 Total Return Index, measured from the day of inauguration to the last full day of a president’s term.

Some people say the starting point is not right, as a new president influences politics and the mood of the public on election day or even earlier. But I think this is the best method. After all, if an incumbent president invaded Cuba or imposed wage and price controls, it would move the markets whether the new president agrees with the policy or not.

Here’s how Biden and the previous 15 presidents rank, ranked by annualized stock returns.

One conclusion that jumps out at you is that Republicans and Democrats both have big winners and big losers. The first three places in the ranking are occupied by the Democrats. But Democratic icon John Kennedy ranks at the bottom of the ladder, as does Lyndon Johnson, program architect for the Great Society.

Among Republicans, Donald Trump, Gerald Ford and Dwight Eisenhower have formidable numbers. But Richard Nixon, George W. Bush and Herbert Hoover bring up the rear – the only three with negative returns.

Studies by Ned Davis Research show stocks gained 7.98% per year under the Democratic president, compared to just 3.6% per year under the Republicans. However, inflation was higher (4.22%) under Democrats than under Republicans (1.80%). The inflation-adjusted gap is therefore more modest.

Why is it in place

Why has Joe Biden done so well so far? Part of the answer is the right time. Scientists released a vaccine against Covid-19 shortly after taking office. It was a big plus for the markets. The passage of an infrastructure bill also gave the stock market a boost. Spending on roads, bridges and the Internet superstructure is expected to increase demand for many businesses.

Figures from Biden’s polls, however, suggest that market strength from January to November may not last. His approval rating recently hovered close to 43%, down from around 55% in the early days of his administration. Markets prefer strong presidents, regardless of party.

Look ahead

Whether the market continues to perform well depends in part on decongesting the country’s ports, tackling the current labor shortage and containing the latest variant of the coronavirus.

To tip the scales in your favor, it may be helpful to try and guess how Biden’s policies will affect the market over the next three years. I think Biden will continue to push vigorously for infrastructure spending, following the passage of the recent infrastructure bill. Possible games here include Sterling Construction Co. (STRL), Fluorine

FLR
and Nucor

NAKED
.

He will, I believe, push for increased access to health care, although nowhere near as fast as the left wing of his party wants. This bodes well, I think, for pharmaceutical companies such as Merck

MRK
and Pfizer

PFE
Inc. (PFE).

Biden’s reappointment of Jerome Powell as head of the Federal Reserve likely means interest rates will rise, but slowly. This should help financial stocks, especially banks such as JPMorgan Chase (JPM) and Bank of America

BAC
.

So far, Biden has maintained Donald Trump’s hard line on trade with China. Lately, JP Morgan wrote that a thaw in the icy trade relations between the United States and China is taking less time than one might think. If they are right, I think some beneficiaries might be commodity companies such as Archer Daniels Midland (ADM), semiconductor manufacturers, Apple

AAPL
and the major car manufacturers, General Motors

DG
and Ford engine

F
.

Disclosure: I own Apple, Nucor, and Sterling Construction personally and for most of my clients. I own Fluor, JP Morgan, Merck, Pfizer for one or more clients.


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