We’re in the early days, of course. Biden hasn’t served a full year yet. And the market slide on Nov. 26, if sustained, could change the numbers rapidly.
But through Nov. 26, the Standard & Poor’s 500 Index has advanced 20.74% under Biden (including dividends). Annualize that and you get a 24.84% rate of return.
Either the raw number or the annualized number would put Biden at the top of the charts. Preceding Biden, Bill Clinton was on top, at 17.49% per year. Barack Obama was second at 16.25% and Donald Trump third with 15.95%.
For these calculations I use the Standard & Poor’s 500 Total Return Index, measured from Inauguration Day to the last full day of a president’s term.
Some people say the starting point isn’t fair, since a new president influences policy and the public mood beginning on Election Day or even sooner.
But I think it’s the best method. After all, if an outgoing president invaded Cuba or imposed wage-and-price controls, that would move the markets, whether the new president agreed with the policy or not.
Presidential rankings
Here’s how Biden and the 15 previous presidents stack up, ranked by annualized stock market returns.
President Cumulative Annualized
Joe Biden 20.74% 24.84%
Bill Clinton 263.72% 17.49%
Barack Obama 233.71% 16.25%
Donald Trump 80.76% 15.95%
Gerald Ford 42.53% 15.57%
Harry Truman 207.98% 15.56%
Dwight Eisenhower 217.15% 15.51%
Ronald Reagan 207.83% 15.08%
George H.W. Bush 73.13% 14.71%
Jimmy Carter 59.33% 12.40%
Franklin Roosevelt 300.95% 12.15%
Lyndon Johnson 73.17% 11.23%
John Kennedy 30.42% 9.82%
Richard Nixon -3.50% -0.64%
George W. Bush -26.75% -3.82%
Herbert Hoover -77.09% -30.82%
One conclusion that jumps out at you is Republicans and Democrats both have big winners and losers. The top three spots in the table are occupied by Democrats. But Democratic icon John Kennedy ranks near the bottom, as does Lyndon Johnson, architect of the Great Society programs.
Among Republicans, Donald Trump, Gerald Ford and Dwight Eisenhower have terrific numbers. But Richard Nixon, George W. Bush and Herbert Hoover bring up the rear – the only three with negative returns.
Studies by Ned Davis Research Inc. show that stocks have gained 7.98% per year under Democratic presidents, versus only 3.6% per year under Republican ones. However, inflation has been higher (4.22%) under Democrats than under Republicans (1.80%). So the inflation-adjusted gap is more modest.
Why it’s up
Why has Biden done so well, so far? Part of the answer is lucky timing. Scientists brought out a vaccine for Covid-19 shortly after he took office. That was a big plus for the markets.
Passage of an infrastructure bill also gave the stock market a shot in the arm. Spending on roads, bridges and internet superstructure should add to demand for many companies.
Biden’s polling numbers, however, hint that the market’s strength from January to November may not last. His approval rating lately has been near 43%, down from about 55% in the first days of his administration. Markets prefer strong presidents, regardless of party.
Looking ahead
Whether the market continues to perform well depends in part on unclogging the nation’s ports, combatting the current labor shortage and containing the latest variant of the coronavirus.
To tilt the odds in your favor, it may help to try to guess how Biden’s policies will affect the market in the next three years.
I believe Biden will continue to push vigorously for infrastructure spending, following up on passage of the recent infrastructure bill. Possible plays here include Sterling Construction Co. (STRL, Financial), Fluor Corp. (FLR, Financial) and Nucor Corp. (NUE, Financial).
He will, I believe, press for increasing access to health care, though nowhere near as fast as his party’s left wing wants. That bodes sell, I think, for pharmaceutical companies such as Merck & Co. Inc. (MRK, Financial) and Pfizer Inc. (PFE, Financial).
Biden’s reappointment of Jerome Powell as head of the Federal Reserve probably means that interest rates will rise, but slowly. That should help financial stocks, notably banks such as JPMorgan Chase & Co. (JPM, Financial) and Bank of America Corp. (BAC, Financial).
So far, Biden has continued Trump’s hard line on trade with China. Lately, JPMorgan has been writing that a thaw in the frosty U.S.-China trade relationship is less of a long shot than people think.
If they’re right, I think some beneficiaries could be agricultural commodity companies such as Archer Daniels Midland Co. (ADM, Financial), semiconductor makers like Apple Inc. (AAPL, Financial) and the big auto makers, including General Motors Co. (GM, Financial) and Ford Motor Co. (F, Financial).
-- John Dorfman is chairman of Dorfman Value Investments in Boston. His firm of clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.
