Obama’s term a boost for stocks, but will it help?

Barack Obama often gets slammed for his stewardship of the US economy, but for stock investors, he’s been one of the best presidents since World War II.

At 1,400, the S&P 500 on Friday was closing in on a four-year high and was up 74% since Jan. 20, 2009, the day Obama took office.

Not since Dwight Eisenhower’s first term has a president had such a strong run for their first term.

That rally might be just enough to get Obama re-elected, making him the first sitting president in the post-war era to win a second term with a jobless rate higher than 7.2%.

“Even though business and corporate sentiment is not good for Obama because they don’t think he’s been good for the economy, the fact that the market has done very well under him is a positive,” said Ethan Siegal, head of The Washington Exchange, which analyzes politics for institutional investors.

Soon after taking office, the president even waded into the dangerous territory of stock market prognostication.

On March 3, 2009, Obama, responding to a question about a market that was hitting 12-year lows, said: “What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you’ve got a long-term perspective on it.”

The S&P 500 hit bottom a week later. Three years on, US stocks have more than doubled, adding USD 6.8 trillion in market capitalization.

“The stock market is a barometer not of the absolute level of the economy but of improvement in the economy,” said former Merrill Lynch strategist Richard Bernstein, who now runs his own investment management firm. “There is no doubt the economy has improved in the last four years.”

Conventional wisdom has it that a stock market rally is good news for a sitting president, and it often has been. But not all rallies are the same, and the lack of a concurrent boost in home values, along with the weak job market, may mean the gains over the last three years don’t have the same benefit for Obama.

Tom Wales, director of North America analysis at Oxford Analytica, noted that most Americans who hold stocks do so in their 401(K) retirement accounts, and “if you’re worried about your job, about your mortgage being underwater, then the fact that your 401(K) looks less bare is not that reassuring.”

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