Joe Biden’s time within the White House has been a positive one for U.S. stocks. – MarketWatch illustration/Getty Images, iStockphoto
U.S. stocks closed out Joe Biden’s era on a high note because the president bids farewell to the White House.
The forty sixth president of the USA is bringing his time on the White House to a detailed with the S&P 500 SPX up over 55% since he took office on Jan. 20, 2021. The Dow Jones Industrial Average DJIA advanced greater than 39% over the identical period, while the tech-heavy Nasdaq Composite COMP jumped nearly 46%, in keeping with Dow Jones Market Data.
Nevertheless, the Dow and the Nasdaq saw their worst returns since George W. Bush’s second term between 2005 and 2009, while the S&P 500 logged its smallest gains since Barack Obama’s second term between 2013 and 2017, in keeping with Dow Jones Market Data (see table below).
SOURCE: DOW JONES MARKET DATA –
To be certain, Biden’s presidential term began in 2021 with an escalation of the COVID-19 pandemic and an economic downturn. The key stock averages still posted double-digit returns by the tip of that yr, as the worldwide economy began its recovery from the pandemic, while the Federal Reserve maintained supportive monetary-policy measures first implemented in early 2020.
But in 2022, Wall Street suffered its worst yr for the reason that 2008-’09 financial crisis amid Russia’s invasion of Ukraine, while the U.S. economy grappled with soaring inflation and better rates of interest.
Then in 2023 and 2024, a tech-fueled earnings recovery and the artificial-intelligence frenzy propelled U.S. stocks to historic levels. The S&P 500 scored back-to-back double-digit annual gains by the tip of 2024 — and is now kicking off its third yr in a bull market.
David Russell, global head of market strategy at TradeStation, said there was “an explosive surge” in cyclical sectors of the economy that benefited from the reopening after the pandemic and the Biden administration’s landmark Inflation Reduction Act in 2022, which “really spurred industrial activities that in some ways triggered higher rates of interest and the bear market of 2022,” he told MarketWatch on Friday.
“But then the AI thing was [a] completely different [tailwind for the market] since it had nothing to do with Biden. It had been constructing for years before coming to fruition within the early a part of 2023,” Russell said.
Hopes have been high on Wall Street since President-elect Donald Trump won the presidential election in early November. Investors have been betting that the previous president’s return to the White House could further strengthen the economy and company America by providing tax relief, cutting financial regulations and mountain climbing tariffs.
But a few of his economic plans could lead on to a rising fiscal deficit and a resurgence of inflation, which can harm the government-debt market and send rates of interest higher again.
Stocks jumped sharply after Trump’s victory on Nov. 5, but they erased a few of their postelection gains in the next two months. The S&P 500 rose 3.7% from Election Day through Jan. 17, its worst performance in that span since Obama was elected in 2008. The Dow popped 3% and the Nasdaq was up 6.5% in the identical period, in keeping with Dow Jones Market Data (see chart below).
SOURCE: DOW JONES MARKET DATA –
“The very first thing that happened within the stock market for the reason that election was the market rally with risk assets going up and rates of interest happening. Then impulsively, inflation fears kicked back in … and we were left with a much steeper yield curve,” said George Cipolloni, portfolio manager at Penn Mutual Asset Management.
Treasury yields surged last week after stronger-than-expected jobs data sparked a pointy selloff within the government-debt market, jarring stocks and prompting investors to think about the chance that the Fed might have to pause interest-rate cuts until later this yr. Then this week, a comparatively benign consumer-price index report triggered a pointy relief rally in stocks and bonds, dragging down the 10- BX:TMUBMUSD10Y and 30-year BX:TMUBMUSD30Y rates.
“We’ve normalized rates here on the longer end, but every shift up or down in Treasury yields is gonna have a magnified effect on the stock market,” Cipolloni told MarketWatch via phone on Friday.
But in Russell’s view, there’s “no reason for investors to only assume Trump will do the whole lot in a way that may cause problems” for the financial markets and the economy, since all these fears about tariffs pressing up on inflation could turn out to be ‘a wall of worry’ that dissolves,” he said.
The stock market has moved “sideways” over the past three months and traded around where it settled after Election Day, which has made Russell and his team consider stocks could break out of “this era of consolidation” very soon.
“Looking ahead, we see double-digit earnings growth. We see the Fed placing a dovish expectation and reducing a few of these hawkish beliefs that emerged in the previous few weeks, and we see the brand new president coming in with executive orders [on deregulations],” he said. “Individuals who have been sitting on the sidelines might feel that there’s a reason to be getting more involved again.”
U.S. stocks finished higher on Friday, the ultimate trading day of Biden’s term in office. All three major benchmarks posted weekly gains amid a retreat in Treasury yields. Investors were also looking forward to this week, when Trump is ready to be inaugurated as president for the second time.
