23 August 2014

Dow Tops 17,000. Are Stock Market Returns Steadily Improving?

The Dow closed above 17,000 for the week. In the 1999 bull market, it peaked at about 11,500 and in the pre-Great Recession market of 2007, it peaked at nearly 14,000. It is at a new high. I may have to re-think taking advice from the Tea Party. If they are right that he's a socialist, it is terribly confusing that capital markets have performed so well during Obama's administration.

Here's an interesting list ranking stock market performance during a president (using the closing number as the end of the year they left office - typically 9 to 11 months after their successor is sworn in).

Dow Jones, Avg. Annual Returns

Calvin Coolidge (R) 32%
William Clinton  (D) 26%
Ronald Reagan (R) 24%
Dwight Eisenhower  (R) 19%
George H. Bush  (R) 17%
Franklin Roosevelt  (D) 15%
Warren Harding  (R) 13%
Harry Truman  (D) 10%
John Kennedy  (D) 8%
Gerald Ford  (R) 4%
Lyndon Johnson  (D) 3%
Teddy Roosevelt  (R) 1%
George W. Bush  (R) 0%
William Taft  (R) 0%
Woodrow Wilson  (D) -1%
James Carter  (D) -2%
Richard Nixon  (R) -6%
Herbert Hoover  (R) -17%

During Obama's administration the market is up an average of 21% per year, which would put him between those other socialists, Reagan and Eisenhower. It would also mean that 4 of the last 5 presidents are among the top 6 administrations in terms of stock market performance. That suggests that market returns have been going up in the last 30-some years.

This chart, however, suggests that it is less a matter of positive years getting better than it is negative years becoming less severe. Perhaps this has nothing to do with presidential policy but instead reflects the fact that the Federal Reserve is getting better at mitigating risk in the market. Market contractions are becoming shorter in duration and less severe. That's enough to help anyone's performance.

No comments: