Stock Market Performance and Economic Philosophy: Long Obama (Demand Side) Short Trump (Supply Side)

Abstract

This paper compares the stock market (S&P) performance during presidents Trump and Obama. The comparison is interesting since Obama employed a stimulus plan (demand side) while Trump employed a tax cut (supply side). We use the inauguration date as the benchmark start till analyses day 7/7/2019; first 662 days. The S&P performance during President Obama (first 622 trading days) is 59.1% while the S&P performance during President Trump is only 32.5%. As for volatility, during the entire 2 terms of Obama presidency, the Dow never lost 1000 points or more in a day, while in the first 2 years of Trump presidency Dow lost twice 1000 points or more in a day. Also, during the first 622 days of Trump presidency, the Dow lost 500 and 400 points or more in a day about 16 and 25 times, respectively; almost three times more than the entire president’s Obama 2 terms presidency. With regard to drop of the unemployment rate, which is lagging policy by 3 quarters, during president Obama the unemployment rate went down by 1% (from 10% down to 9%), while during president Trump from 4.1% to 3.6%. Thus, we conclude that the demand side beats the supply side in this round.

Keywords: political cycle, economic policy, stock market performance and volatility, unemployment

JEL Classification: G12