Some feared that Joe Biden would be bad for stocks.
Others (probably not the same people) were sure that U.S. markets would tank under Donald Trump, as reflected by the overnight cratering in stock futures the night he won his first term in 2016, in a surprise over Hillary Clinton.
Instead, both Biden and Trump have been good for stocks – or at least U.S. stocks have flourished during their terms in office.
In Biden’s four years, the S&P 500 returned 56%, despite decades-high inflation and interest rates. During Trump’s first four years, the S&P gained 67%, despite the worst global pandemic in a century. And for all the angst over tariffs, still-high prices and declining consumer sentiment over the past 13 months since Trump’s second inauguration, stocks are doing just fine, up 12.7% – slightly better than their historical 10% annual return.
In fact, every U.S. President dating back to George W. Bush has “outperformed” the 40% average four-year return that dates back to Dwight Eisenhower’s first term. Bush the Second is actually the only “underperformer” of the last 40 years, in fact, dating back to Ronald Reagan’s mere 30% return in his first term.
Which party gets the better returns? That would be the Democrats, perhaps to the surprise of some.
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Democratic vs. Republican Presidents, By the Numbers
According to data compiled by TD Economics and Bloomberg, through 2024, and thus the end of Biden’s term, the average annual return under Democratic presidents, dating back to 1946, is just over 10%. The average return under Republican presidents is just over 6%, though the past 13 months of Trump’s second term have likely improved that calculus a tad.
The best stock market performance by a president in the post-World War II era came under Bill Clinton; the S&P 500 was up a whopping 210% in his two-term presidency, from 1993-2001. The second-best return under a U.S. president? That would be Barack Obama’s eight-year tenure, when the S&P was up 189% from 2009-2017.
Next up are a pair of Republican presidents: stocks rose 129% under Dwight Eisenhower (1953-1961) and 117% under Ronald Reagan (1981-1989).
Rounding out the top five is Democrat Harry S. Truman, who saw the S&P rise 87% during his eight-year term (1945-1953). President Trump is currently on pace to surpass him and enter the top five, though who knows what will happen over the next three years.
Trump vs. Biden vs. Obama
Of course, context matters when it comes to U.S. presidencies.
It’s important to note that Obama took office just as stocks were hitting multi-year lows on the heels of the worst recession since the Great Depression. Obama benefited from the bounce-back—though, you could argue that he was largely responsible for facilitating it.
On the flip side, President Trump had the bad fortune of being in office when the worst global pandemic in more than a century forced Americans to stay home almost an entire year and the economy to plunge. One can debate how his handling of Covid-19 impacted the economy and by extension the stock market (I’m not touching that one). But the coronavirus would have been bad news for any president, at least for a time.
Biden certainly benefited from global post-Covid reopening trends and a resilient U.S. consumer, at least in the first year of his term. But he gave back a lot of those returns in his second year, when inflation spiked above 9% and the Fed started raising interest rates at a breakneck pace, leading to a bear market in 2022.
And that’s really the point. Stock market rallies can last for generations, cross aisles, and survive times of terrible political turmoil like we have now. Though Wall Street historically prefers a Democrat in office, there has been many a bull market on the watches of Republican presidents. For evidence, look no further than Donald Trump’s five years in office.
Bottom line: markets are apolitical. Investors don’t normally care who’s president, just so long as companies – and the U.S. economy – continue to grow far more often than they contract.
Speaking even more broadly, the market’s gravitational pull is up. And it’s the person in the White House’s job not to screw it up – regardless of party.
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*This post is periodically updated to reflect market conditions.
