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Obama Is Third Best First Term Stock Performance President
Author: Adam ShellSource: USA TODAY
Credit Season’s Perspective:
Credit Season’s Perspective:Such insight as foretelling the long term value of buying stocks at a point where there was financial panic may be one of the factors that led Obama’s first term to be one of the best in history for stocks.
New York–Critics brand him as anti-business and anti-Wall Street. Yet, President Obama’s first term was bullish for stocks.
The Standard& Poor’s 500 index has risen 85% since Obama was inaugurated on Jan. 20, 2009, says S&P Capital IQ. That tops first-term gains of Obama’s past four predecessors: George. W. Bush, Bill Clinton, George H.W. Bush and Ronald Reagan.
Using the Dow Jones industrial average, Obama ranks third in first-term stock performance of all presidents; Franklin D. Roosevelt is No. 1, and Clinton No. 2, says Bespoke Investment Group.
On March 3, 2009, six days before the end of the worst bear market since the Great Depression, Obama urged skittish investors to buy beaten-down U.S. stocks. At a time when fear was high and it seemed like stocks would never stop falling, he said valuations “are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it.”
“You have to give him credit for that market call,” says Ed Yardeni, president of investment advisory firm Yardeni Research.
Obama’s prognostication was spot on. Despite all the criticism he has received since the Great Recession for backing bailouts of banks and automakers, and for using borrowed money to stimulate the economy, stocks have responded positively. The bull market, which could turn 4 years old on March 9, is up 120% and ranks eighth best of all time, Bespoke says.
Does the president deserve all the credit for a bull market that just keeps going? Not likely, even though investment and political cycles are often tied together, says Yardeni. “It is not the sole determining factor, nor the most significant factor.”
J.J. Kinahan, chief derivatives strategist at TD Ameritrade, says Obama deserves credit, but he also had the benefit of a “little bit of luck,” the knowledge that big stimulus was in the pipeline, as well as being in “the right place at the right time.”
Behind the Obama bounce:
- Oversold market was due for a rebound.(AT) The stock market cratered 57% in the bear market that ended two months after Obama took office. The 18-month-long recession ended five months after Obama’s inauguration, and stocks tend to rise when the economy emerges from recession. In FDR’s first term, beginning in 1933 after the Great Depression, stocks rallied 149%, says S&P Capital IQ.
- Fed help.(AT) The Federal Reserve’s aggressive policies to jump-start the economy, including 0% short-term interest rates and the purchase of government and mortgage-backed bonds to keep borrowing costs low, were a major help for stocks during Obama’s first term, Yardeni says.
“I would say that the great performance of the stock market has a lot more to do with Federal Reserve Chairman Ben Bernanke than Obama,” Yardeni says.
Stock have been more muted in presidents final terms. Since 1900, stocks have risen just 10.2%, on average, in term two, vs. a gain of 67% in first terms, Bespoke says.