Stocks

How Do Trump's Dow Records Stack Up?

Yes, Mr. President, you're breaking some records -- but the stock market isn't the best way to measure presidential performance.

Presidential?

Photographer: Drew Angerer/Getty Images

U.S. stock markets have been breaking records lately. President Donald Trump has noticed, and he's worried that perhaps you haven't. As he tweeted on Tuesday:

The numbers the president cites (accurately, except for the part about Election Day being six months ago) are the Dow Jones Industrial Average, which closed above 22,000 for the first time ever on Wednesday. The part of the mainstream media that I work in, the financial media, actually does mention these all-time highs whenever they happen, although it doesn't make a huge deal out of them given that they've been occurring pretty frequently over the past four-plus years. When the Dow set its first record in 5 1/2 years on March 5, 2013, that was news, as it was when the Standard & Poor's 500 Index did the same a few weeks later. One more all-time high in a succession of all-time highs is by definition a lot less newsworthy.

That said, the stock market's big gains in the nearly nine months since Election Day (the Dow was up 20.1 percent as of Wednesday's close) and 6 1/2 months since the inauguration (up 11.6 percent) are noteworthy. This bull market has been getting lots of attention in the financial media (where it's usually referred to as the "Trump bump"), and it would probably be getting more play in the rest of the media if Trump himself weren't constantly creating so much other news to cover. Still, I thought it might be useful to pay it some attention by putting it in context. That is, how does the market's performance so far during the Trump era compare with what it did under past presidents?

I opted to use the Dow Jones Industrial Average as my metric, as Trump did. Yes, it's narrow and primitive. Yes, the S&P 500 is better and the Russell 3000 better yet -- and, perhaps ominously, both of those indexes actually stopped going up two weeks ago even as the Dow continued to rise. But over time, all these market measures do head in more or less the same direction. Plus, the Dow average has been calculated daily going all the way back to May 1896, allowing us to track the number of new all-time stock market highs during every presidency since that of William McKinley:

Market Highs and Presidents

Dow Jones Industrial Average all-time highs per administration

Sources: Bloomberg, author's calculations

Bill Clinton is the champion market record-setter, followed by Calvin Coolidge, Ronald Reagan, Dwight Eisenhower and Barack Obama. All of those but Coolidge (who took over after Warren Harding's death and was president for about 5 1/2 years) served two full terms, though. Trump has been in office for less than seven months, and lots of other presidents served less than eight years. So to equalize things, here are the number of market highs divided by the number of years each president was in office (in Trump's case, 0.53 years so far), and ranked from highest to lowest: 1

Market Highs and Presidents, Annualized

Dow Jones Industrial Average all-time highs per year in office

Sources: Bloomberg, author's calculations

Wow! That Trump performance really stands out! Still, the metric is a little quirky. Consider Franklin Delano Roosevelt, the longest-serving and one of the most consequential of all presidents, who scores a big fat zero in stock market highs even though the economy came back from near death during his tenure and the market actually performed pretty well. It's just that the Dow had fallen so much during the previous administration that it would take more than two decades to get back to the highs set in 1929. Perhaps the compound annual growth rate of the Dow under each president would be a more informative metric: 2

Market Performance and Presidents

Compound annual growth rate of the Dow Jones Industrial Average

Sources: Bloomberg, author's calculations

Silent Cal wins out here, but the market's performance under Trump comes in a close second. Couple that with all the record-setting documented in the previous chart, and one could perhaps say that Trump has up to now presided over arguably the greatest annualized stock market performance of any president since people started measuring stock market performance. To rephrase, without the qualifiers: If he leaves office today, Trump will have presided over the greatest stock market performance of any president ever. Even shorter, in case they want to read it out loud on "Fox & Friends": Trump will be the greatest president ever if he quits today.

That's a big if, though. Trump has only been president for 6 1/2 months, and stock market performance has a tendency to revert to the mean over time. It turns out, in fact, that lots of presidents started out with even stronger stock market runs than Trump:

The First 6 1/2 Months

Change in Dow Jones Industrials Average in 194 days after inauguration

Sources: Bloomberg, author's calculations

It is perhaps not entirely fair to measure from inauguration, given that the market started rising the day after Trump was elected. I did so because five presidents since McKinley assumed office after the death or resignation of a predecessor, meaning that for them there was no Election Day to measure from. But just to cover all the bases, here's stock market performance in the 267 days after Election Day under Trump and the other presidents who first took office after winning an election:

Nine Months After Election Day

Change in Dow Jones Industrial Average in 267 days after election

Sources: Bloomberg, author's calculations

Trump makes it up to fourth place by this measure. That's pretty impressive. The guy in second is a little worrying, though. The Dow rose 35 percent in the nine months after Herbert Hoover was elected, then it collapsed. It's a little like what recently deposed White House Chief of Staff Reince Priebus told the Atlantic's Molly Ball over the weekend: The Republican Party, he said, is "in the best shape it’s been in since 1928.” After 1928, of course, everything went haywire for the GOP. That's not to say that the party is now necessarily fated to decades of woe or that a stock market crash is around the corner. It's just a reminder that past performance is no guarantee of future results.

Also, stock market performance is not the same thing as presidential performance. A 2016 FiveThirtyEight aggregation of scholarly rankings of presidents put Theodore Roosevelt and Woodrow Wilson, whose terms coincided with very weak stock markets, in the top 10, and Calvin Coolidge, who enjoyed the biggest annualized market gains of all, in 27th place (out of 43).

So, yes, the stock market has done quite well since Donald Trump was elected. That probably deserves a bit more media attention than it has gotten. Not all that much more, though. And the president's decision to emphasize the Dow as a measure of his success is maybe not the most prudent thing in the world. He was at it again this morning:

This implies that if the Dow starts falling, it will be the president's fault. ("That doesn't just happen!") Decisions made in Washington certainly influence the course of the economy and of financial markets. But the stock market's going to do what the stock market's going to do. It doesn't take orders from the White House.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

  1. The presidents with zero Dow all-time highs are listed in reverse chronological order.

  2. I measured performance from the day before inauguration to the day before the next president's inauguration. If markets were closed on either day, I used the most recent closing price before that day.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
Brooke Sample at bsample1@bloomberg.net

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE
Comments