Markets are closed today as president George Herbert Walker Bush’s demise last month will be remembered at a National Cathedral memorial service in Washington. The official mourning of the 41st U.S. president will be the first such farewell in almost a decade.
Trading on the New York Stock Exchange and Nasdaq will be halted. The last time markets remained closed was on Jan 2, 2007 to commemorate the death of president Gerald Ford. The bonds market, by the way, has been recommended to remain closed by the Securities Industry and Financial Markets Association, or Sifma, a prominent financial-industry trade group. This means trading in bonds, including the 10-Year Treasury yield, could see limited movement on Dec 5.
George H.W. Bush has been a statesman of vision and an astute businessman. He became the president at a time when the economy was booming and had become the head of state from a towering political stature Ronald Reagan. He is fondly remembered for his foreign policy achievements, but had more difficulties to face at the ballot boxes than his son.
However, when it comes to stock market returns, the elder Bush easily trounced the younger. Under George H.W. Bush’s tenure (Jan 20, 1989-Jan 20, 1993) the stock market gave an impressive return of 11% per year, whereas under George W. Bush, the market lost nearly 6% every year.
Bush’s S&P 500 Return 3rd Best for a Republican
The late George H.W. Bush currently ranks as the third-best GOP president for the stock market, in terms of the S&P 500 returns. The broader index had gained 52% during the Texas Republican’s term in the White House.
Bush trailed GOP predecessors Dwight D. Eisenhower and Ronald Reagan. While the S&P 500 yielded an astounding return of 130% during Eisenhower’s eight years in office, Reagan’s two terms resulted in a 114% surge in the S&P 500.
(Source: CNBC Markets Team)
Looking at the major political parties, Democrats in fact presided over the top three biggest S&P 500 gains. Bill Clinton, who beat Bush, saw the S&P 500 gain a staggering 209% during his stint as the president of the United States. Barack Obama saw a 166% advance, while Franklin D. Roosevelt saw the S&P 500 climb 141%.
(Source: CNBC Markets Team)
Thus, George H.W. Bush’s overall stock market return ranks seventh out of all the 16 presidents since the S&P 500 started.
Can the S&P 500 Repeat the Laudable Show Under Trump?
It’s worth remembering that Bush’s tenure saw a period of economic downturn. Restrictive monetary policy by the Fed in response to inflationary concerns, decline in consumer confidence due to the 1990 oil price shock and decrease in defense spending as Cold War era ends were cited to be the primary reasons to have led to the recession. Still, the S&P 500 came up with encouraging returns, much to investors’ delight.
Similarly, if not a recession, the Trump administration is plagued by a slew of concerns that sent the S&P 500 into a free fall. The relentless flattening of the U.S. yield curve is weighing on financial shares and has compelled JPMorgan Chase & Co. JPM to say that cash will likely outperform equities in the near term. In fact, JPMorgan Chief Executive Jamie Dimon added that the fourth quarter trading activity may remain flat, leading to further woes in the financials.
The biggest company in terms of market-cap is doing no good to the markets either. Major suppliers to Apple Inc. AAPL have recently cut their outlooks, indicating that the tech giant is about to face slowing sales.
What about the current state of the economy? It’s not good either. Recent housing starts and new home permits are down, while existing home sales have started to soften. This has in turn forced Toll Brothers, Inc. TOL, one of the high end builders to post discouraging results for the latest quarter.
But, a major issue impacting the stock market is that the supposed trade truce between China and the United States is beginning to look more like a vague agreement. After all, there are major differences in what the leaders want from the deal.
Trump focused on trade issues, including a 90-day pause on raising tariffs and Xi’s concession to buy “very substantial” amount of energy and agricultural goods from the United States to address the trade imbalance. Meanwhile, China is predominantly focused on diplomacy and regional issues. Xi’s government surely wants to resolve complex territorial issues such as Taiwan and South China Sea before the truce develops into a full-grown peace treaty.
With the world’s two largest economies’ approach being strikingly dissimilar, the G-20 truce thus has merely paused the trade war but not put an end to it, something that doesn’t bode well for the stock market. But if this differing depiction of the deal is addressed by Trump, the stock market can surely bounce back. This will for certain improve his stock market legacy rank, which is currently the sixth-best for a GOP president.
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