The stock market reached a historic low when Barack Obama assumed office. Despite the initial challenges, his presidency coincided with significant growth in the Dow Jones Industrial Average (DJIA), highlighting his economic legacy. However, it's important to consider the market's performance over the entire presidential term rather than solely attributing it to the inauguration day. Obama's second term and the overall market trends demonstrate that a president's impact on the market is complex and influenced by various factors.
Basics
When Barack Obama took office in 2009, the DJIA was in dire straits. On his inauguration day, January 20, 2009, the DJIA plummeted to 7,949.09, marking the lowest inaugural performance in terms of percentage drop since the index's inception in 1896. The S&P 500 and Nasdaq also experienced substantial declines of 5.3% and 5.8%, respectively. Moreover, fourth-quarter earnings reports were on track to drop by more than 20% compared to the previous year.
Banking Sector Woes
The banking sector was struggling even before Obama became president, and this continued after he took office. On his first day as president, the banking sector experienced a significant decline of 30%. Bank of America Corporation dropped 29% and Citigroup Inc. sank by 20%. It's worth noting that this decline was not necessarily because people lacked confidence in Obama, but rather because of the economic difficulties left behind by the previous administration.
Market Rebound
Despite the gloomy inauguration day, the market found a bottom in March 2009 and embarked on one of the longest bull markets in history. This rally highlights that attributing market performance solely to a president's inauguration day can be misleading.
Obama’s Second Term
Obama was inaugurated for his second term on Sunday, January 20, 2013. As the market was closed that day, it remained closed on Monday, January 21, for Martin Luther King Jr. Day. However, on Tuesday, January 22, the DJIA opened at 13,649.70 and closed at 13,712.21. While it might seem that market participants had more confidence in Obama during his second term, it's important to avoid drawing hasty conclusions based on short-term market movements.
Presidential Comparisons
Analyzing a president's impact on the market based solely on their inauguration day or even their first year in office lacks sufficient data for meaningful conclusions. Each inauguration comes with unique economic circumstances that make it challenging to draw accurate assessments. Instead, evaluating the market's performance over an entire presidential term provides a better understanding of their economic impact.
- President Donald Trump's first year in office saw impressive market performance, comparable to President Jimmy Carter's tenure.
- President Clinton's first term witnessed exceptional DJIA performance.
In the case of President George W. Bush, the stock market declined by over 8% during his first year and lost 3.7% by the end of his first term. However, these losses were largely influenced by the dotcom bust, which had little connection to the president's economic policies. What remains evident is that both the historic lows during George W. Bush's administration and the challenging start to Obama's presidency were tied to broader economic crises.
Obama's Stock Market Legacy
Despite the initial economic challenges, Obama's presidency coincided with a significant upswing in the stock market. By the end of his second term on January 20, 2017, the DJIA had not only recovered from its January 2009 low but had also experienced substantial growth.
Conclusion
When Barack Obama assumed the presidency in 2009, the stock market was grappling with the aftermath of the financial crisis and hit a historic low on his inauguration day. However, it's essential to recognize that the market's performance on this particular day should not be solely attributed to the president's influence. Instead, a more accurate gauge of a president's impact on the market is to consider their entire term(s) in office. In the case of Obama, his presidency ultimately saw remarkable growth in the DJIA, underlining the importance of evaluating a president's economic legacy comprehensively.