Presidential Starts: 1900 - 2009
Tuesday, March 3, 2009 at 08:33AM While there are any number of polls that are taken to measure public opinion of a specific event or policy, for investors, the ultimate gauge of opinion on anything is the performance of the market. With that in mind, there has been a lot of talk regarding the performance of the Dow Jones (DJIA) so far during President Obama's term. Upon his election, many in the media and on Obama's staff said that his election would bring about a new sense of hope in the American psyche, much in the same way that other democratic heavyweights such as FDR and JFK improved sentiment in America. However, based (rightly or wrongly) on the stock market's return so far, this new sense of hope has yet to bear out.
From the time President Obama was elected to his inauguration, the DJIA put in its worst performance over all election to inauguration periods since 1900, with a decline of 17.4%. And on the day President Obama was sworn in, the DJIA put in its worst ever inauguration day performance with a decline of 4%. Since then, things haven't gotten much better. Not including the inauguration day decline, the DJIA has dropped an additional 14.92% since President Obama was sworn in. Over the last two weeks, these declines have intensified with losses in ten out of the last twelve trading days.
Critics of President Obama have used these statistics as ammunition against his policies, while his supporters have laid the blame on the issues that he inherited. 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. Through yesterday's close, the DJIA's performance during President Obama's first 41 days in office is the worst of any President since at least 1900.
The Administration has made it abuntantly clear that its main objective is to help make the lives of lower and middle class Americans better. While their objectives are to ultimately help the lower and middle class at the expense of the upper class, all classes of Americans own stocks either directly or indirectly through 401(k)s and pensions. As the market declines, all classes lose out, and it's important to remember that the "wealthiest" Americans tend to have the most diversification and access to the best investment advice. This can help to insulate them from market declines. While the DJIA lost 34% of its value in 2008, equity hedge funds lost less than half that amount. Less "wealthy" Americans, especially those with indirect ownership of stocks, tend to have less access to the best investment advice and/or have little or no choice in directing their investments. Some of the hardest hit Americans during this bear market have been middle class workers who for the last twenty years maxed out their 401(k) contributions under the belief that these funds would be there when they retired. Now they are looking at a future that is a lot less certain. Pro-market policies will go a lot further to help the middle class than a stimulus plan that puts an extra $13 a week in their pockets.
Like it or not, the DJIA's performance under President Obama will say a lot in determining whether or not his Presidency is a success or a failure. Some of the most highly regarded Presidents on a historical basis also oversaw large gains in the stock market, while some of the least popular Presidents such as Hoover, Nixon, and Bush II saw large declines while they were in office. Gerald Ford's tenure as President also started off on a bad note, when he took over after President Nixon's resignation. However, during his tenure the market turned around, and by the time he left office the Dow was up 23% over his term. While Obama said today that he is not 'worried about the day to day gyrations of the stock market,' the decline we have seen recently is anything but day to day or a gyration. It is a free fall. Mr. Obama's tenure has just started, and it's gotten off to a shaky start, but let's all hope that the market heads higher during his tenure so that all classes of Americans can benefit.
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