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Despite the excitement surrounding a presidential election, the stock market’s performance is largely indifferent to who holds the office. Stock prices over the long term are primarily driven by corporate earnings and an overall healthy economy. However, research indicates that the stock market does exhibit patterns that align with the presidential cycle.
Data sourced from the “Stock Trader’s Almanac” and Carson Investment Research clearly demonstrates that the third year of a presidential term tends to yield the highest returns. In contrast, the first, second, and fourth years deliver relatively similar returns, with the first or second year typically showing the lowest average annual returns, depending on the specific data set referenced.
The reasoning behind this cycle is logical. In the first two years of their terms, presidents usually focus on appealing to their constituents, often resulting in lukewarm stock market returns. However, in the third year, with reelection on the horizon, presidents usually prioritize economic growth and bolstering corporate profits. The fourth year introduces a degree of uncertainty, as market participants often adopt a wait-and-see approach until election outcomes are confirmed.
Considering all these factors, let’s delve into the S&P 500’s performance during the first year of each presidential term in the modern age. Since the S&P 500 was established in 1957, the analysis includes only presidents inaugurated for the first time post-1957. President Dwight D. Eisenhower’s 1957 inauguration was his second term, hence excluded, along with the second terms of other eight-year presidents.
Take a look at how the economy fared under each president from Lyndon B. Johnson to Joe Biden.
John F. Kennedy, 1961
- S&P 500 close on Jan. 20, 1961: 59.96
- S&P 500 close on Jan. 19, 1962: 68.75
- Percentage gain: 14.66%
Lyndon B. Johnson, 1963
- S&P 500 close on Nov. 20, 1963: 72.56
- S&P 500 close on Nov. 20, 1964: 86.28
- Percentage gain: 18.91%
Richard Nixon, 1969
- S&P 500 close on Jan. 20, 1969: 101.69
- S&P 500 close on Jan. 20, 1970: 89.83
- Percentage loss: -11.66%
Gerald Ford, 1974
- S&P 500 close on Aug. 9, 1974: 80.86
- S&P 500 close on Aug. 8, 1975: 86.02
- Percentage gain: 6.38%
Jimmy Carter, 1977
- S&P 500 close on Jan. 20, 1977: 102.97
- S&P 500 close on Jan. 20, 1978: 89.89
- Percentage loss: -12.70%
Ronald Reagan, 1981
- S&P 500 close on Jan. 20, 1981: 131.65
- S&P 500 close on Jan. 20, 1982: 115.27
- Percentage loss: -12.44%
George H.W. Bush, 1989
- S&P 500 close on Jan. 20, 1989: 286.63
- S&P 500 close on Jan. 19, 1990: 339.15
- Percentage gain: 18.32%
Bill Clinton, 1993
- S&P 500 close on Jan. 20, 1993: 433.37
- S&P 500 close on Jan. 20, 1994: 474.98
- Percentage gain: 9.60%
George W. Bush, 2001
- S&P 500 close on Jan. 19, 2001: 1,342.54
- S&P 500 close on Jan. 18, 2002: 1,127.58
- Percentage loss: -16.01%
Barack Obama, 2009
- S&P 500 close on Jan. 20, 2009: 805.22
- S&P 500 close on Jan. 20, 2010: 1,138.04
- Percentage gain: 41.33%
Donald Trump, 2017
- S&P 500 close on Jan. 20, 2017: 2,271.31
- S&P 500 close on Jan. 19, 2018: 2,810.30
- Percentage gain: 23.73%
Joe Biden, 2021
- S&P 500 close on Jan. 20, 2021: 3,851.85
- S&P 500 close on Jan. 20, 2022: 4,482.73
- Percentage gain: 16.38%
