Presidential Stock Markets

The performance of the Dow Jones Industrial Average (DJIA) under various U.S. presidents has long been a subject of debate, providing political fodder but offering limited actionable insights. The key drivers of market returns are often the initial conditions—such as valuations and economic context—while presidential policies generally can play a supporting role.

Dow Jones Industrial Average

We chose the DJIA as the reference index for this analysis because it is the oldest and longest-running market average, dating back to the start of our study in 1901 during Theodore Roosevelt’s administration. Historical outliers, such as Herbert Hoover’s catastrophic market losses during the Great Depression and Calvin Coolidge’s speculative bubble, distort long-term averages. Since 1901, the Dow’s compounded annual growth rate (CAGR) has been 5.62%, closely tracking nominal GDP growth. However, since the Reagan administration, stock market returns have significantly outpaced historical norms due to structural economic changes and policy shifts. For clarity, refer to the table for returns excluding outliers.

The debate over when to measure presidential market performance—Election Day or Inauguration Day—adds nuance to the narrative, with timing differences often favoring one party over another.

Barack Obama inherited a collapsing market during the 2008 Financial Crisis, with a sharp recovery shortly after he took office. Conversely, George W. Bush encountered the dot-com bubble’s fallout early in his term and left amid the Great Financial Crisis.

Donald Trump entered office with historically high market valuations (117% market cap-to-GDP). Through aggressive tax cuts, deregulation, and unprecedented fiscal and monetary stimulus during the COVID-19 pandemic, the Dow rose 56.75% during his term, reflecting an 11.89% annualized return.

Inflation Drives Stocks

Joe Biden began his presidency with even more stretched valuations (181% market cap-to-GDP). Despite these conditions, the DJIA gained 40.60% under his leadership, translating to an 8.89% annualized return. Four years ago, we speculated that Biden would require significant inflation to sustain positive market returns—and inflation indeed became a dominant factor.

As Trump enters his second term, he faces a challenging landscape: either market valuations will decline, or inflation will intensify as the primary driver of stock market performance. Notably, Trump’s proposed policies lean heavily toward inflationary outcomes.