Was Donald Trump really the best-ever President for the US economy?

Stock markets are enjoying a Biden bounce. Markets greeted the inauguration of the 46th US president with a round of applause, or perhaps relief.

In truth, major indices have been on a tear since March, when fears about what Covid-19 could do to economies were most stark.

The Dow Jones fell below 20,000, It is now well above 31,000.

In London, the FTSE 100 that fell below 5000 is now around the 6660s.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: “President Joe Biden’s move into the White House has brought the stability and certainty craved by investors following a fraught election campaign and a violent aftermath.”

Will this continue? 

A $2 trillion stimulus package should help. But there is certainly concern that at least some stocks, notably big tech, look frothy.

This week the World Economic Forum in its Global Risks Report for 2021, warned that an Asset Bubble Burst is high on its worry-list.

Big-tech, Amazon and the rest, are plainly a huge part of everyone’s future. JP Morgan chief Jamie Dimon admitted this week he is “scared sh**less” about their power.

But it doesn’t follow that their shares, and therefore the wider market will keep on going up.

One reason for investor optimism is this: stock markets do better under Democrats than Republicans.

Our chart here makes the point.

Over a 4-year presidential term, the Dow Jones rises on average by 37.6%. Under Republicans it goes up a puny 28.9%. And under Democrats a punchy 48.5%.

Under Donald Trump, the Dow rose 45.3% -- fair enough. But that is nowhere near the returns made during Bill Clinton’s first term (111%). In George Bush’s second term, stocks lost 24% making him the worst performing President for shares. He did have a war on terrorism to deal with, in fairness.

How to explain these figures?

Russ Mould at AJ Bell offers: “It does seem odd that the historic data suggests the US market does better, on average, under a Democrat President rather than a Republican one, when so much comment is expended on how a ‘red sweep’ is seen as more helpful than a ‘blue’, progressive, liberal one.

“Perhaps this is because while markets like to talk a good game about hair-shirt fiscal responsibility, they are much happier seeing money spent and invested or handed out, rather like the wider electorate. How many politicians really get thanked for austerity and asking people to grind out the hard yards? Even Churchill lost in 1945 after six years of blood, sweat and tears.”

Maybe it is also just a quirk.  

Bill Clinton was in power when the tech bubble of the 1990s was booming and the Republicans’ George W Bush was in power when the tech bubble burst and US equities tanked from 2000 to 2002.