U.S. President Donald Trump has on multiple occasions pointed to how U.S. stock markets have delivered strong returns under his presidency. U.S. stock markets indeed swelled to record highs in his presidency despite the COVID-19 pandemic. What was the Dow Jones when Trump took office and how have his economic policies impacted U.S. stock markets?
The Dow Jones Index is a price-weighted index of 30 U.S. companies and is among the oldest stock exchanges globally. While the S&P 500 might have dethroned it as the most popular index, for many investors, Dow Jones still means the “stock market.”
Dow Jones under Trump’s presidency
Donald Trump became the 45th U.S. president on Jan. 20, 2017. The Dow Jones closed at 19,827.25 on that day, a marginal rise over its previous day’s closing. The Dow Jones closed at 18,400.50 on Nov. 8, 2016, Election Day. Between Trump’s election and inauguration, it rallied 7.7 percent on hopes that his economic policies would positively impact the stock markets.
Did Trump’s economic policies help U.S. stock markets move higher?
While some of Trump’s economic policies, especially with regards to the trade war, were negative for the stock markets, his tax cuts helped propel the earnings for U.S. companies and we saw a rally in stock markets. Trump administration pursued accommodative fiscal and regulatory policies that were supportive of the markets. The Dow Jones index surged to new record highs under Trump’s presidency.
Dow Jones record during the Trump presidency
Under Trump’s watch, the Dow Jones made several records. In November 2020, the Dow hit 30,000 for the first time and the month was the best for the index since Jan. 1987. In April 2020, the Dow Jones had its best April in 82 years. The second quarter of 2020 was the best quarter for Dow since 1987.
However, there were also some less celebratory records amid the COVID-19 pandemic. The 11-year long record bull market for the Dow Jones ended in 2020 and it was the sharpest bear market. The S&P 500 fell 30 percent in a span of only 22 days this year which was another “record” under Trump’s presidency.
Also, the volatility as measured by the VIX index surged to a record high in 2020. The 1,000-point daily price movement in the Dow Jones became quite common in 2020 as markets digested the news over the COVID-19 pandemic.
How has the Dow performed under Trump’s presidency?
Trump has bragged about the records set by the Dow Jones many times. He had even said markets would crash if he were not re-elected. However, the Dow Jones surged in November 2020 after Joe Biden emerged as the presumptive president-elect.
However, that does not mean U.S. stock markets didn't fare well in Trump’s presidency. The Dow Jones has gained over 50 percent in Trump’s tenure despite the COVID-19 pandemic taking a toll on U.S. economic activity.
The annualized returns under Trump’s presidency are similar to what we saw under Obama’s eight-year tenure. However, Obama had the advantage of a lower base effect as the Dow Jones has crashed in 2008, the year before he was inaugurated.
Meanwhile, Joe Biden will face an uphill task in matching the stock market returns under his two predecessors. However, green energy and cannabis stocks could deliver good returns under his presidency. Both these sectors have rallied sharply after his election and the momentum might continue in his tenure as well.