The Obama Bull

What a difference a few months makes.  As most investors were painfully aware, President Obama's first term in office certainly got off to a poor start.  On his inauguration day, the DJIA declined 4%.  This was the worst performance on the day of a Presidential inauguration since at least 1900.  Things didn't get much better soon thereafter.  Forty-one days into his presidency, the DJIA's performance was also the worst for any US President since 1900.  To many, this was a sign that the market was not comfortable with his policies and their ultimate impact on business.  Others argued that the declines were the result of the problems that Obama inherited.  As we noted back in April, "Both the critics and supporters of the President have valid arguments.  With the passage of time, however, President Obama's ownership of how the market unfolds (good or bad) becomes less debatable, and as it stands now, he is not off to a good start."

As time has passed and Obama's ownership of the economy has become less debatable, the market's performance has seen a major reversal.  There is still a little more than a month left in his first year, but as of today, the DJIA's 32% gain is on pace to be the second best first year return for a US President since 1900.  The only President with a better first year return was FDR who oversaw a gain for the DJIA of 96.1%.  While there are many who argue that Obama's policies will hurt business and the economy, so far the market is saying that his critics are wrong.

Click chart for larger view.

 

Comments

[Sia]

Market is saying stocks were undervalued during the start of the year. Nothing more. To truley determine if the market 'likes' Obama, you would need to set up a parallel universe where McCain or someone else became president and compare the market performance of the two environments. There is very little I hate more than (invalid) conclusions made from market action.

[Lord]

Or at least good for finance and the market. The economy may be a different story.

[Kirk Kinder]

One needs to look at the entire term or Presidency to make any judgement like this. Reagan saw an 11% decline in his first year in office, but I suspect most investors would love to have the next seven years equal Reagan's last seven.

[VennData]

Sia, The 'Obama bull market' is being compared to all other presidential starts, not some counter factual as you claim. You'd better get your "hate" reset, because you're the one who's creating a false conclusion, called a "straw man."

http://en.wikipedia.org/wiki/Straw_man

KK, I would not want more Reagan debts and deficits nor anther S&L debacle. We can't have another GOP-engineered real estate collapse or debt explosion (recall as of today we've only been on the Obama budget for a couple months. I know you won't believe that, but it's true, the '08/'09 $1.4T deficit was Bush's last budget.)

It may help naysayers to note that the current Commander-in-Chief suggested buying stocks days from the absolute low...

http://www.usnews.com/articles/news/obama/2009/03/04/obama-says-buy-stocks-now-good-deals-there-for-long-term-investors.html

...but from their strident "hate," false recollections about the Reagan debacle, and lack of understanding of the structural deficits Bush has left us with, I doubt they'll listen.

[Sia]

VennData, what you said made no sense. I was referring to bespoke concluding: "While there are many who argue that Obama's policies will hurt business and the economy, so far the market is saying that his critics are wrong." I am not sure what a 'counter factual' is, nor do I think it is an actual term. Moreover, the only conclusion I made was that it is impossible to assess a president via the market behavior.