Do stocks care about Presidents?

[Lsbcal]

I read this article by Ben Carlson:
Does the Stock Market Care Who the President Is?

After Carlson presents a table showing Presidential term losses:

Every president saw severe corrections or bear markets on their watch. The average loss over all four-year terms was 30 percent. The average loss under a Republican administration was 37 percent while the average loss under the Democrats was 24 percent. But these differences don’t really tell you much about the two parties. The stock market does not care about Republicans or Democrats.

and the last paragraph:

...investors should prepare for the possibility of large losses in the stock market in the next four years. Regardless of who is in the Oval Office, that’s just how the stock market functions.

Something to consider in all the media back and forth. Does not tell us how to time the market though.


My guess going forward (presented in the smallest font because it's purely speculative ):
We go up in irregular fashion, people forget the previous bad times, and then the yield curve inverts. Then the market goes down with a (hopefully mild) recession. Then off to the races again.

 

[exnavynuke]

Presidents have a large impact on legislative agendas. Legislative agendas can have a large impact on the economy and specific industries. Large impacts on the economy and/or specific industries can have a noticeable impact on company stocks, and thus the stock market. Obviously (I hope), that doesn't mean that the President's agenda is necessarily related to any specific performance of stocks during or after their time in office however as many other variables impact stocks as well.

 

[Dash man]

I know many prefer to invest in index funds, and I have a relatively small percentage in index funds, but investing in a solid company's stock I believe is the way to go. It takes time and effort to watch and monitor a company's outlook, but it pays off during a recession. The market may tank for a while, but good companies recover faster and don't dip as much.

 

[MRG]

Correlation = causation?

 

[Totoro]

Sort of. Legislation undoubtedly has impact on economies and companies.

Some have argued for example that the repeal of Glass-Steagall was a major factor leading to the housing crisis. If that were true, it does reveal something interesting: the repeal was done in 1999, and the housing crisis started hitting hard in 2008. That's nine years and two presidents onwards.

Something similar can be argued with the savings & loans crisis: lots of stuff happened late 70s, early 80s that led to great trouble from 1986 onwards.

In other words: stocks/companies care about the last few presidents as much as the current one.

Not to mention presidents of other countries ..

 

[Which Roger]

Strange and misleading article. All it's doing is picking the range of dates within a president's term that gives the biggest loss and showing that loss. I.e., cherry picking data. It does not show the date range either. And nothing about gains. Didn't the Dow about double during Obama's first term? And all we see in the table is a 22% loss.

 

[Lsbcal]

Strange and misleading article. All it's doing is picking the range of dates within a president's term that gives the biggest loss and showing that loss. I.e., cherry picking data. It does not show the date range either. And nothing about gains. Didn't the Dow about double during Obama's first term? And all we see in the table is a 22% loss.

Well this is certainly not intended to be an exhaustive article. I just thought that it was worth remembering, given all the angst constantly expressed on our forum, that downturns happen in all administrations.

Not saying this is a new finding. We've seen recent postings with people worrying that they have too much out of the market and when to put new money into it. Just got to expect a bumpy ride.

 

[Which Roger]

I just thought that it was worth remembering, given all the angst constantly expressed on our forum, that downturns happen in all administrations.

That is an important point. Perhaps I was a bit too hard on the article.

 

[NW-Bound]

I don't know if stocks care about presidents. Presidents always care about stocks. But stocks don't do what presidents want. Thus, it is hard to tell what stocks will do.

 

[Winemaker]

Since the market is cyclical, one can pick a cycle and postulate.

Or one could pick the beginning of the current cycle and ride another 50 years+ worth of future cycles. Or not.

 

[growing_older]

Every president saw severe corrections or bear markets on their watch. The average loss over all four-year terms was 30 percent.

Obviously impossible, If every presidential term is a bear market, then the market would go nowhere but down. If there are any facts at all here, they are choosing data selectively to make up a story.

 

[RetiredGypsy]

We look for magic in what changes the market. It's not magic. It's strange and weird and unpredictable. There is no formula. It does what it does. The best you can do it hold on and try to ride it's up before it becomes its downs.

If you're lucky, you can keep investing in the downs.

The market is unpredictable. That's the only truth. Market timing, market predictability, trying to know what the market thinks or does, these are the basic tenets of trying to make the best of the market. Most people can't make this happen.

It's not rocket science. The phase of the moon, the political dependency of the presidency, the latest technological craze, the latest fashion, whatever, it's impossible to say what the market will do.

 

[jazz4cash]

Wow. Had to check back a few times to verify if the comments here were really related to the link.
For some reason the drawdown chart got too much attention. I went to an Edelman seminar way before the election where this topic was discussed and the conclusion was similar to this quote from the linked article:
"For example, if you look at the stock market performance under both Republicans and Democrats going back to 1853, two full presidential terms before Lincoln took office, the performance is fairly similar. Total returns under Democrats were 1,340 percent, the total returns under Republicans were 1,270 percent."

 

[DrRoy]

I know many prefer to invest in index funds, and I have a relatively small percentage in index funds, but investing in a solid company's stock I believe is the way to go. It pays off during a recession. The market may tank for a while, but good companies recover faster and don't dip as much.

I think you will find that individual issues are more volatile than the market as a whole.

 

[Dash man]

I think you will find that individual issues are more volatile than the market as a whole.

Some are and some aren't. I'm just saying picking some individual stocks with strong fundamentals including a solid outlook, results in a faster recovery and overall better results. My opinion that did well for me in 2008-09.

 

[easysurfer]

I think stocks care more about the fed chairperson than the president.

 

[joeea]

Obviously impossible, If every presidential term is a bear market, then the market would go nowhere but down. If there are any facts at all here, they are choosing data selectively to make up a story.

Of course it doesn't say that every presidential term is a bear market.

It says that every presidential term saw a bear market.

Not the same thing at all.

 

[exnavynuke]

Some are and some aren't. I'm just saying picking some individual stocks with strong fundamentals including a solid outlook, results in a faster recovery and overall better results. My opinion that did well for me in 2008-09.

As long as you "pick right" every single time, then the increased risk associated with fewer holdings can be offset performance. If you pick wrong, then you get to see why fewer holdings in a portfolio is associated with higher risk. Of course, if one of your solid holdings looked that way because of illegal accounting (a la Enron etc) then you could see a significant decline in your portfolio even if the broad market was doing well at the time. That is of course assuming that, like most investors, you don't have enough money to buy sufficient individual companies in order to have index fund-like diversification.

 

[growing_older]

Every president saw severe corrections or bear markets on their watch. The average loss over all four-year terms was 30 percent. The average loss under a Republican administration was 37 percent while the average loss under the Democrats was 24 percent.

I understand the idea that every term saw a bear market sometime, but this quote doesn't say that. Maybe I'm a lazy reader, but I don't want to have to figure out that what the author wrote isn't what he really meant, I'd prefer that he just write to be understood in the first place, instead of erring on the side of sensational claims.

 

[Danmar]

Stock markets always take into account all information that's available.

 

[HFWR]

Presidents like to take credit for good markets, but then like to shift blame to others for bad markets. Imagine that...

 

[Chuckanut]

Years ago Luis Rukeyser (of Wall Street Week fame) interviewed his father Merryle (an accomplished financial journalist) and asked if the president made a difference. In his opinion it didn't matter one bit who was president.

 

[NW-Bound]

Every president saw severe corrections or bear markets on their watch. The average loss over all four-year terms was 30 percent. The average loss under a Republican was 37 percent while the average loss under the Democrats was 24 percent.

I understand the idea that every term saw a bear market sometime, but this quote doesn't say that. Maybe I'm a lazy reader, but I don't want to have to figure out that what the author wrote isn't what he really meant, I'd prefer that he just write to be understood in the first place, instead of erring on the side of sensational claims.

The article author did add that "But these differences don’t really tell you much about the two parties. The stock market does not care about Republicans or Democrats."

For example, the tech bubble burst and 9/11 would take down the market no matter who the president was. Looking at the list of market meltdowns in the article, one sees that there have not been that many market crashes. Hence, the sample size is not that large to draw meaningful statistics.

 

[almost there]

Large impact years after they have left office. Keeps you guessing............
Much less impact than say, a Korean missile.............