Analyzing Stock Market Trends Under U.S. Presidents: A Historical Perspective

As the U.S. presidential election approaches, market analysts are closely watching how stock performance may be influenced by leadership changes. Recent findings from Deutsche Bank Research reveal a striking trend in the S&P 500’s annualized total returns under various presidencies since 1933. Emerging from this analysis are two notable exceptions to a long-term trend of double-digit gains, primarily marked by significant historical events beyond the control of the sitting presidents.

Long-Term Returns and Unexpected Exceptions

According to Jim Reid, global head of macro and thematic research at Deutsche Bank, the S&P 500 has consistently seen annualized returns within the double-digit range under most U.S. presidents. This perspective is particularly relevant as we inch closer to the November 5 election, with both policymakers and investors anticipating outcomes that could lead to vastly different fiscal and monetary policies.

However, Reid notes that “it may be better to be lucky than good,” suggesting that external events—often unpredictable—rather than policy decisions, are likely to dictate market performance in future presidencies. Analyzing the annualized total returns of the S&P 500 under different presidents since 1901, Deutsche Bank observed that the stock index notably fell under the administrations of Herbert Hoover and Richard Nixon.

The Outlying Performances

Since 1933, the S&P 500 experienced declines in its annualized returns during just two presidencies—Hoover’s and Nixon’s. Reid points to various events that shaped these downturns, notably the Great Depression and the oil crisis of 1973. He explains that the case of George W. Bush’s administration also presents a difficult scenario for equity returns, where the aftermath of the dot-com bubble and the onset of the global financial crisis precipitated significant market declines.

Hoover’s presidency (1929–1933) is often scrutinized for its role in exacerbating the Great Depression, a period that marked an unparalleled decline in economic conditions. Reid emphasizes that previous administrations also laid the groundwork for these events. For example, Calvin Coolidge’s presidency (1923–1929) oversaw what could be regarded as a market bubble, contributing to the catastrophic crash of 1929.

Statistical Overview of Presidential Market Performance

Since 1933, thirteen out of the last fifteen U.S. presidents have overseen S&P 500 annualized total returns ranging from 10% to 17%. Interestingly, seven of the last nine presidents experienced even tighter returns, recorded between 14% to 17%. Currently, under President Joe Biden’s administration, the S&P 500 has achieved an impressive annualized total return of 14%. This figure sits just below the 16% total return seen during former President Donald Trump’s term from 2017 to 2021.

Current Market Climate and Future Predictions

As the election approaches, U.S. stocks are experiencing a bull market. Notably, the S&P 500 has surged an impressive 22.7% in 2023, and as of the latest reports, remains just 0.2% below its all-time high closing record achieved on October 18. Despite slight fluctuations observed earlier this week—where the S&P 500 and Dow Jones Industrial Average saw declines of less than 0.1%, and the Nasdaq Composite rose by 0.2%—the overall market sentiment remains strong.

As Americans gear up for one of the most consequential elections in recent history, market participants must now consider not only the potential presidential candidates but also the broader economic events likely to unfold regardless of the outcome. All eyes will be on Election Day as voters decide between Vice President Kamala Harris, the Democratic nominee, and former President Trump, her Republican rival, to take the helm in the Oval Office.

Conclusion

The analysis of stock market performance under U.S. presidents presents a fascinating glimpse into how political leadership interplays with economic trajectories. While the historical data favors a narrative of resilience and growth, exceptions driven by unpredictable global events remind us of the volatility inherent in financial markets. As we inch closer to November, the question for investors becomes not only who will win the election but also how the broader economic landscape will evolve in response.