Stock returns during Trump’s presidency
Trump was inaugurated the 45th U.S. president on Jan 20, 2017. That day, the S&P 500 closed at 2,279.55, rising 0.34 percent. Between Trump’s inauguration date and the announcement of Biden's victory, the S&P 500 has gained 54 percent, and between the two election result dates, the S&P 500 has gained 64 percent, or 13.2 percent annualized. Under Trump’s tenure, U.S. stock markets have reached record highs, likely because of his administration's tax cuts and regulatory easing.
How did Trump’s policies impact U.S. stock markets?
While most global markets are down this year, U.S. stock markets have recovered from their March lows and hit record highs—they're at the top worldwide, performance-wise. The fat stimulus package the Trump administration announced earlier this year propelled markets higher.
Changes announced by Fed chairman Jerome Powell, who hasn’t had the best of relations with Trump, also boosted markets. Powell announced unprecedented monetary policy easing, pivoting from the Fed’s inflation-targeting approach.
That said, not all of Trump’s economic policies were appreciated by stock markets. In 2018, U.S. stock markets tumbled as Trump escalated the trade war with China and several other trading partners. The tit-for-tat tariffs and U.S.-China tensions pressured U.S. stock markets, which react to uncertainty. The Biden administration may find it hard to reverse Trump's anti-China rhetoric.
How did markets perform under Obama’s presidency?
Barack Obama was inaugurated the 44th U.S president on Jan. 20, 2009, and was elected president on Nov. 4, 2008. When Obama took office, the S&P 500 closed at 805.22, down 5.2 percent from its previous closing. However, on Obama's election day, the S&P 500 gained 4.1 percent.
The S&P 500 gained 112 percent over the eight years between when Obama was elected in 2008 and when Trump was elected in 2016, marking an annualized return of 9.8 percent. During Obama’s eight-year presidency, the S&P 500 gained a cool 182 percent and returned 13.7 percent annualized.
However, we should remember that the global financial crisis at that time prompted some wild moves in markets. Under Obama’s first term, markets were coming off their 2008 lows.
How will stock markets perform under Biden’s presidency?
It's still too early to call how U.S. stock markets will perform under the Biden administration. Many believe that his tax proposals—both on income tax and capital gains tax—will be negative for the market.
Furthermore, Biden will become U.S. president when valuations are running at multiyear highs. Given those elevated valuations and the COVID-19 pandemic, it could be difficult for U.S. stock markets to deliver the kind of performance they did under Biden's last two predecessors.