Strangely, The Stock Market Loves Obama

By Steven Russolillo

It’ll be tough for the Obama haters to argue against this juicy little nugget.

The Dow Jones Industrial Average has surged 60% since Barack Obama was inaugurated as president three years ago, according to research firm Bespoke Investment Group. This means President Obama is one of only five presidents that have witnessed the blue-chip index surge more than 50% during their first three years in office.

The best return came under FDR, when the stock market surged a whopping 190% during the first three years of his term. Stocks also rallied 60% during President Eisenhower’s first three years and 60% amid the same time frame for Bill Clinton.

Now we’ll admit here at MarketBeat that there are many caveats that go into this data. There is also a definite distinction between correlation and causation that must be highlighted.

First, the stock market in early 2009 was only several weeks away from bottoming following the financial crisis and ensuing great recessions. Bounces off major bottoms are common. President Obama reaped the benefits on this one.

Same can be said for the FDR rally and Clinton run-up, which came after the Great Depression and the early-1990s recession. These presidents partly benefited from timing. But the rallies also underscore how risky bets paid off following periods of tumultuous market activity.

The political wrangling that jostled markets for much of 2011 is also nothing that the current president needs to be commended for. The debt-ceiling debates and ensuing credit downgrade prompted stocks to swoon, including a 500-point drop on President Obama’s 50th birthday, briefly dipping the S&P 500 into bear-market territory before bouncing back.

The failure of the super committee late last year also caused a massive selloff and was perceived as another black eye for the current administration.

And just because the market has soared over a three-year period doesn’t mean investors should be viewed as pro-Obama. Quite the contrary, in fact, as many argue this president has been one of the most anti-business leaders in recent memory.

Remember stocks are coming off a lost decade and major stock indexes remain well below all-time highs hit more than four years ago.

Not surprisingly, economists and academics are divided on the impact that presidents have on stock-market performance and vice versa.

But for now, prospects are looking rosy for stocks. The major indexes are off to face-ripping start, with the S&P 500 notching its best start to a new year since 1987.

And if history is any guide, the rally may not peter out anytime soon. A goes January goes the rest of the year for stocks, according to the Stock Trader’s Almanac. The S&P’ 500′s performance for January has mirrored that year’s total return 77% of the time dating back to 1950.

We still have a week and a half left in the month, but the S&P 500 has already gained 4.3% in January.

Additionally, presidential election years are the second-best performing years of the four-year cycle, according to the Almanac. Stocks have only declined by more than 5% during presidential-election years on six occasions since 1896.

In 13 of the last 15 presidential elections, the S&P 500 has rallied during the final seven months of those years.

So, no matter your beliefs, it’s tough to argue against the stock-market’s track record during Obama’s tenure.

And for those who use history as a guide, better times may still be on the horizon.

{Market Beat-WSJ/Matzav.com Newscenter}