One of the ironies of Barack Obama's presidency is that he's considered anti-business. The reality is business has fared remarkably well under Obama, especially compared with many other constituencies that have struggled.
With Obama's first term now officially over, the stock market performance during his first four years ranks in the top third of presidents who have served since 1900, according to analysis by S&P Capital IQ. The S&P 500 rose by 58 percent during the calendar years ranging from 2009 through 2012. The stock market fared worse during the first terms of 13 presidents since 1900. Here are the four presidents who notched a better stock-market performance than Obama during their first full terms:
- Franklin Roosevelt: 149 percent increase in the S&P 500 from 1933 through 1936.
- Calvin Coolidge: 133 percent increase. (1925 – 1928)
- Dwight Eisenhower: 76 percent increase. (1953 – 1956)
- Bill Clinton: 70 percent increase. (1993 – 1996)
There are all sorts of asterisks and anomalies, of course. Coolidge first took office in 1923 after Warren Harding died, and the stock market's performance during his first four years as president (1923 - 1926) was weaker than during his first full term, from 1925 through 1928. And during his first full term, Coolidge presided over a bubble economy that burst the year he left office, leaving his successor, Herbert Hoover, to grapple with the beginning of the Great Depression—and a 72 percent drop in the stock market during his one term, the biggest decline under any president, by far. FDR came into office with the stock market near a low point and got credit for gains during his first term that were largely a snapback from the plunge under Hoover.
A mild recession at the beginning of Eisenhower's first term lasted less than a year, with the stock market surging once it was over. Clinton enjoyed a booming economy and a roaring stock market during his entire presidency.
Obama, like FDR, inherited a damaged economy and a bear market that was bound to turn upward at some point. But Obama had one advantage during his first term that no president has ever had: An activist Federal Reserve aggressively pursuing policies meant to inflate stock prices, among other things.
Under Chairman Ben Bernanke, the Fed began an unprecedented "quantitative easing" policy just a few weeks before Obama first took office. It intensified those policies early in Obama's presidency, a move that coincided with the bottoming out of the stock market and a rally that has now lasted nearly four years. So while Obama did reappoint Bernanke to a second term of his own in 2010, it may be Bernanke more than Obama who can claim credit for the healthy performance of the stock market during Obama's first term.
Investors would love to know, of course, whether the stock market will continue it ascent during Obama's second term, or lose altitude. Most Wall Street forecasters are predicting modest stock market gains over the next few years, predicated on an economy that picks up steam. The Fed has also suggested it will continue its market-friendly policies until 2015, perhaps longer.
The biggest risk is that inflation becomes more of a problem than expected, forcing the Fed to end quantitative easing prematurely. That would test whether stocks are fairly valued or artificially inflated by the Fed—a challenge most investors would rather not face.
Meanwhile, history suggests a more subdued stock-market performance during Obama's second term. On average, the stock market has gained 38 percent during a president's first term since 1900, according to S&P Capital IQ, but only 17 percent during a second term. If that pattern holds, businesses will have even more to gripe about in four years.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.