At around noon Friday, Donald J. Trump took the oath of office and became the 45th President of the United States. Despite much anxiety among people who didn’t vote for him, the world didn’t end and the stock market didn’t crash.
Yet those who expected the new president to reach out to his defeated opponents with conciliatory words and olive branches were disappointed.
President Trump’s inaugural address was bellicose and unyielding, explicitly advocating “protection” and “America first,” in a call to arms against Democrats and Washington Republicans alike. It echoed the dark vision of a country under siege (“American carnage,” he called it) that marked his acceptance speech at the Republican National Convention in Cleveland.
Perhaps reflecting that, stocks sold off from their highs earlier in the day. But who really knows why the stock market moves on any given day? What we do know is that from this day on, President Trump “owns” the economy and the stock market and, fairly or not, his popularity will ride on it.
So, what are his chances?
The excellent John Authers of the Financial Times compared the performance of the Standard & Poor’s 500 index under the last 11 presidents. Bill Clinton, of course, was the leader, with a 209.8% gain. President Obama took office less than two months before the S&P’s March 9, 2009 bottom of 676.53, a 13-year low. He ranked second, with a gain of 181.13% during his tenure.
Now we all know presidents don’t move markets by themselves; whatever they enact requires Congressional approval, as do appointments to the Cabinet and Federal Reserve. And there’s a lot of luck and timing, too: Bill Clinton had the good fortune to be president during the dot.com boom and Internet revolution, while President Obama took over just as stocks and the economy were hitting their lows.
He did a few things—the stimulus, auto bailout, continuation of the Bush Administration’s bank rescues—that prevented the worst from happening. He also had a very accomodative Federal Reserve, but so did George W. Bush, under whom the S&P lost 40%.
At least in stock market performance, Trump has a tough act to follow. By my calculations, the S&P would have to hit 6,338.33–and the Dow to get to 50,000– to match its gains during the Obama years. If earnings kept up with the S&P 500’s current price/earnings ratio of around 17x forward earnings, they, too, would have to almost triple to justify those multiples.
High hopes for tax cuts, regulatory relief, and infrastructure building have fueled the Trump rally. Now he has to deliver, with 3%+ GDP growth and close to full employment. To use a Pottery Barn metaphor, Trump may not have broken it, but he sure owns it.