A television screen on the floor of the New York Stock Exchange shows President Barack Obama during a speech.
(Photo: Richard Drew, AP)
NEW YORK - Despite critics that brand him as anti-business and anti-Wall Street, President Obama's first term in the White House has been bullish for stocks.
The Standard & Poor's 500-stock index has risen 85% since Obama was inaugurated on Jan. 20, 2009, says S&P Capital IQ. That stellar return 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, 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 using borrowed money to stimulate the economy, stocks have responded positively. The current bull market, which turns 4 on March 9, is up 120% and ranks eighth best of all time, Bespoke says.
But does the president deserve all the credit for a bull market that just keeps chugging along?
Probably not, Yardeni says. "There is a tendency to correlate investment cycles to political cycles," he says. "But it is not the sole determining factor, nor the most significant factor."
J.J. Kinahan, chief derivatives strategist at TD Ameritrade, says while Obama deserves some credit, he also benefited from a "little bit of luck," the knowledge that big stimulus packages were in the pipeline, as well as being in "the right place at the right time."
The Obama bounce was driven by the following factors:
• Oversold market was due for a rebound. The stock market cratered 57% in the bear market that ended two months after Obama took office. And the 18-month-long Great Recession, was over five months after Inauguration Day.
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.
• Help from the Fed. The Federal Reserve's aggressive monetary 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, have been a major driver of stock prices during Obama's 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.
History says stock returns are more muted in a president's final term in office. Since 1900, stocks have risen just 10.2%, on average in term two, vs. a gain of 67% in first terms, says Bespoke.
Adam Shell, USA TODAY