
U.S. Presidents and Comparative Stock Market Performance - makaimc
http://www.endlessmetrics.com/blog/president-stock-performance.html
======
desdiv
"Yet the gross national product does not allow for the health of our children,
the quality of their education or the joy of their play. It does not include
the beauty of our poetry or the strength of our marriages, the intelligence of
our public debate or the integrity of our public officials. It measures
neither our wit nor our courage, neither our wisdom nor our learning, neither
our compassion nor our devotion to our country, it measures everything in
short, except that which makes life worthwhile. And it can tell us everything
about America except why we are proud that we are Americans."

\- Robert F. Kennedy

~~~
eaenki
The Kennedys speeches were on another level

~~~
swarnie_
What a difference 50 years have made.

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asaph
It's too bad this analysis was done against the Dow Jones Industrial Average
which is a price weighted index of only 30 large cap stocks and widely
considered to be a poor indicator. Something like the S&P 500 index would
would have been a better choice though it doesn't go as far back as the DJIA.

~~~
computerphage
Although, the Dow doesn't _really_ go back that far either in the sense that
it swaps out stocks occasionally, which could cause spurious conclusions to be
drawn if not accounted for.

~~~
kgwgk
The S&P 500 does also swap stocks, and more often :-)

~~~
kenneth
If the data exists for the underlying stocks in the market, a far better
indicator would be to do an IRR calculation on every stock in the market, or
every stock above a certain market cap threshold (inflation-adjusted). Easy
enough.

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seibelj
It would be interesting to see Clinton's return extended one more year. He
exited right before the dotcom bubble imploded.

~~~
seanmcdirmid
And if Bush could have left a year early, Obama would have taken the fall for
the entire financial crisis (well, many Republicans blame him anyways).

~~~
maxxxxx
Bush was pretty unlucky. 2 massive crashes during his presidency.

~~~
seanmcdirmid
Ya, and neither were completely his fault. However, I do fault him for juicing
a good economy when stimulus would be more effective during a downturn when
not wasted during upturns. Save in good times, spend in bad would do a lot for
stability. 2008 could have been handled much better if he was disciplined
enough during the recovery in between (besides, taking more money out of the
system would have acted against bubbles). In contrast, the Clinton surplus
going into the dotcom bust made it much easier to deal with.

Trump is making similar mistakes, and if a problem occurs on his watch, he is
going to have fewer tools to deal with it (and pressuring the Fed to cut rates
during a boom is unforgivable).

Unfortunately, Americans seem to neither want taxes to go up or interest rates
to rise in good times so they can go down in bad. They just want them to go
down all the time. So we are the most at fault after all.

~~~
AnthonyMouse
The problem with "save in good times, spend in bad" is that people don't
actually save in good times. Even if you raise interest rates, people will
still borrow money when times are good because that's when there's profit to
be made by investing the borrowed money. They do it less when rates are
higher, but they still do it.

The "problem" with the natural cycle is that in bad times people start to
default on their debts, which would otherwise cause banks to raise rates to
account for the higher risk, which would cause even more defaults. By central
banks lowering rates at those times you prevent that from happening, but at
the cost of ballooning everyone's debt out of control. Because then people
affected by the downturn can borrow _even more_ money at the low rates. So we
borrow in good times and borrow even more in bad times. Real debt per capita
has been increasing for decades, which obviously isn't sustainable.

But that's what Keynesianism does -- it defers a crash by allowing otherwise
uncreditworthy people to take on additional debt rather than filing for
bankruptcy, but nobody ever pays the debt back.

Now the problem is times are good except that everybody has too much debt,
which is only fine because interest rates are low. Raise them and everything
falls apart as the money people are currently using to buy stuff and live
their lives is suddenly required to make interest payments on existing debt.

What we need at this point is for people to pay off their debts. But they
can't, because the money they borrowed is now inside corporations that never
spend it.

So we need to either find a way for that money to get out of corporations and
back into the hands of regular people (without crashing the stock market), or
print a bunch of new money that isn't derived from debt and give that to
regular people so they can use that to pay back their debts with.

~~~
TheOtherHobbes
That's not what Keynesianism does. Keynesianism is countercyclical stimulus
spending which boosts the economy in general by increasing activity, balanced
by higher taxes which prevent overheating.

The last decade or two haven't been Keynesian at all - they've been selective
corporate welfare for the financial sector, combined with a bizarre
implication that this will somehow trickle down into the economy as a whole,
combined with very anti-Keynesian low taxation for the beneficiaries.

The effects are as you describe, but more for common sense reason than
Keynesian ones. Financial actors who were some combination of bankrupt,
inefficient, and corrupt were bailed out and Frankensteined into continued
growth when they should have been left to die on the slab.

The result has been a fragile debt, leverage, and froth extraction economy,
tentpoled - for now - by a few giant tech monopolies.

~~~
AnthonyMouse
> Keynesianism is countercyclical stimulus spending which boosts the economy
> in general by increasing activity, balanced by higher taxes which prevent
> overheating.

As implemented by the Fed it means lowering interest rates during downturns to
stimulate spending on credit and raising interest rates during times of
exuberance to cool things off.

But the result of that is that everyone is always getting further into debt,
because it's the bad times when people would otherwise normally have either
defaulted or paid the debts back (to avoid what would otherwise be higher
risk-driven interest rates at those times, compared to the then-lower
investment returns from the borrowed money). So by stimulating borrowing
during recessions, debt increases significantly then instead of being reduced.

Meanwhile it still doesn't get paid back during the good times because the
higher rates reduce borrowing during those times but nobody really wants them
so high during times of productive business opportunities that people divert
money from growing businesses to paying back old debts.

So consumer debt goes up but never down.

The corollary on the government side only works because "high taxes" rather
than "high interest rates" actually increases government revenue, which gives
them something to pay the public debt back _with_. (Assuming that's what they
did with the money, which it isn't -- and can't be with the Fed doing the
opposite, because paying back government debt in good times would lower
interest rates then.)

But on the consumer side, higher interest rates _reduce_ the amount of money
people have to pay back debts with rather than increase it. And so do higher
taxes.

Which leaves the way out as the government creating new money and giving it to
people so that they have something to pay their debts with. Then it doesn't
come from taxes, so you aren't just taking money from people to give it back
to them (or crashing the stock market by taking it from businesses), and it
doesn't come from issuing more government debt, so you aren't increasing
interest rates and causing people to have to pay the money they receive as
interest rather than principal (or crashing the stock market again).

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krzjn
It seems to me that these results don't take into account the fact that
presidents inherit the policies of the previous terms. Some presidents can
ride on the coat tails of former policies and take the credit or blame just
because they're the ones serving. It can take as long as 8 years before the
consequences of bad policy can rear its ugly head.

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cfarm
I wonder if most policies put in place during a president's term actually
affect the next term.

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sonnyblarney
Stock variation doesn't really say much other than probably a degree of
general confidence about how much profits companies can take.

How about actual corporate earnings? (Thereby normalizing for wacky p/e
ratios?)

And what about bond yields? (Because bonds and stocks are the primary assets,
valuations flow from one to the other)

Interest rates? (Because cheaper Fed rates entail easy money)

GDP? (Because that's a measure of the economy)

Housing prices? (Because that's a measure of consumer spending, i.e. 'the rest
of us')

Housing starts? (A measure of business confidence in consumer)

Employment? (A good measure of overall health)

Inflation? (A variety of factors but it puts the others in perspective)

Instead of this 'stock prices' thing they should show us all that for
perspective.

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batterseapower
Allegedly, stocks which are highly exposed to government spending outperform
their low-gov-spending peers under a Dem presidency, and underperform during a
GOP one:
[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1572801](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1572801)

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Leary
A cut in the corporate tax rate shockingly increases equity value.

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carlivar
I've always been more curious about this stat when:

-President and Congress majority are same party (and by party)

-President and Congress majority are different party.

I suspect different parties are better, to reign in the excesses of each. But
not sure. Maybe I'll do it some time.

~~~
cannonedhamster
If the parties were working for the good of all Americans I think you'd be
correct. The Republican party decided to literally impede anything, right or
wrong that President Obama did. Democrats changed some rules for lower court
justices because Republicans refused to even vote against judges just to claim
Obama was leaving seats vacant. That's not governance, that's plain impeding
government from doing it's job by people who don't believe government should
exist. You cannot have a functional government when people meant to govern it
don't believe it should exist.

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markc
Makes no sense to measure from day of taking office. With a 1 year offset,
Trump's market goes from performing "very well" to the erratic mess that it
has been ever since.

