Wednesday, March 4, 2009

Presidents and the DJIA

I thought it was time for another one of my analyses of something that I heard in the news. This time, I heard that the DJIA has lost more in Obama's first month, than any other president's first month. Well, from a point wise this is too easy to prove, it has lost 600 points in his 1st month in office (and continued to go down since then). What is more applicable is to look at the percentage change.

For this I decided to look at three values since 1928. The value of the DJIA after the November election. The value of the DJIA on swearing in of president. The value of the DJIA one month after the swearing in.

E to I E to 1 I to 1
Obama -17% -23% -7%
Bush 2nd 4% 6% 1%
Bush 1st -3% -2% 1%
Clinton 2nd 13% 14% 1%
Clinton 1st 0% 2% 2%
Bush 5% 9% 4%
Reagan 2nd 1% 3% 2%
Reagan 1st 0% -2% -1%
Carter 0% -2% -2%

Nixon 2nd 4% 0% -4%
Nixon 1st -2% -3% -2%
Johnson 2nd 2% 1% -1%
Johnson 1st

Kennedy 5% 8% 3%
Eisenhower 2nd -3% -4% -1%
Eisenhower 1st 7% 4% -2%
Truman 2nd -1% -4% -4%
Truman 1st

Roosevelt 4th 3% 8% 5%
Roosevelt 3rd -2% -8% -7%
Roosevelt 2nd 3% 5% 2%
Roosevelt 1st -13% -8% 6%
Hoover 23% 20% -3%

This table shows the percent change in the DJIA from election to inauguration, election to 1 month, and inauguration to 1 month. Some may argue that the between the election and the inauguration shouldn't count for this president, but I disagree. The president at this point is a lame duck and I believe that Wall Street will operate in anticipation of the policies that the president-elect touted during his campaign.

President Obama has had a drop of 7% from inauguration to 1 month. Only two other presidents have been this dismal. Roosevelt in his third term also lost 7%. Ford lost 15%, of course Ford was never elected either. So we could accurately say that the DJIA has lost more in the first month of Obama than any other elected president.

If we look at from the election to one month, Obama's DJIA has lost far more than any other president. While the majority of this was in the time before the inauguration (-17%) there was also 2 1/2 months between election and inauguration. So overall, the decline has been steady (further supporting my hypothesis that Wall Street anticipates the policies of the president-elect).

So let's go a little further, how do Republicans compare to Democrats in this respect:

E to I E to 1 I to 1
Republicans 4% 3% -2%
Democrats -1% -1% 1%

This doesn't look like there is that much of a difference between the parties. Besides, betting on the market going up about 4% between election and inauguration of a republican, there isn't much difference between the two parties. What this tells me is that over time both Republicans and Democrats have had policies that Wall Street supports and is against. No one is the hero and no one is the big demon.

Let me look at the DJIA over the president's entire term. I looked at it from election to election and inauguration to inauguration.

Election Inauguration
Bush -12% -25%
Clinton 237% 226%
Bush 53% 45%
Reagan 123% 135%
Carter 0% -1%
Ford 26% 26%
Nixon -20% -18%
Johnson 33% 31%
Kennedy 18% 12%
Eisenhower 123% 120%
Truman 71% 82%
Roosevelt 159% 198%
Hoover -76% -83%

The best presidents for the stock market have been Clinton, Roosevelt, Reagan, and Eisenhour. The worst have been Hoover, Bush (43), and Nixon. The best single term or less president was Bush(41). The list is the same whether by election or inauguration. The only notable differances between these are that Bush(43) numbers are only half as bad from election versus inauguration and Roosevelt has a 20% decline between inauguration vs election (although since he died in office this isn't quite an equal comparison). Some insights, even though Ford started out dismal (-15%) his term (which was only 2 years) ended with a 26% increase overall. Nixon and Hoover started out looking bad and ended up even worse.

And if we compare Democrats and Republicans:

Inauguration Election
Republicans 14% 7%
Democrats 43% 20%

It's pretty clear, Democrats have been kinder to the market. In fact, besides Carter who basically saw a flat market from the start to the end of his term, every Democratic President has had an increase of at least 18% (which was Kennedy and he only served 2 years). The great disparity in the numbers of inauguration and election, further support my hypothesis that Wall Street looks to the president-elect after his election.

Since the % decrease since the 2008 election of the DJIA is unlike anything any other president experienced, it is difficult to project what the market will continue to do. Needless to say, Wall Street does not like the economic policies advocated by President Obama thus far.

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