So Barack Obama has been US president for 11 months and two days. How has he done on the economic front? Taking the narrow view of the markets, pretty damn well. After all, he inherited the worst financial crisis since (insert your favourite long-ago event), and now the US is out of recession and the focus is on (the admittedly terrible) jobs situation, rather than economy-destroying bank failures.
I’ve run the numbers, and looking at recent notable presidents, Obama has overseen the second-biggest jump in the markets of any of them. In his first 11 months, the S&P 500 overall rose almost 37 per cent, behind only Roosevelt’s first term (when the back-calculated version of the index soared just under 90 per cent). That makes Obama better for Wall Street’s rich than Reagan, Nixon, or either of the Bushes. And not just a bit better: Reagan’s best performance, in his second term, was a 23 per cent rise, while Dubya managed just 7 per cent, in his second term (in both their first terms the markets fell).
Back when he hit the 50 day mark, the commentators were quick to point out the disastrous performance of the markets: the fastest drop in a president’s first 50 days for at least 90 years (nice graphic here). But while this led to attempts to dub the fall the “Obama bear market”, little has been said about the rebound.
It is unreasonable to judge Obama by the market’s performance; apart from anything else, the fall was overdone, and so is the rebound. But he had a hand in both; the fall was worsened by fears of government meddling (General Motors being the worst example), and the rise exacerbated by exactly the same government meddling (as vast cash and liquidity injections made their way rapidly into asset prices).
It is too early to conclude that Obama has done well, or badly, in managing the economy. But on the Roosevelt comparison, it is worth noting that in FDR’s second term, the markets plunged more than 36 per cent in the first 11 months. Given the vast increase in the deficit and in public debt under Obama, and the increased healthcare spending still to come, a lot of pain has been deferred. When the markets finally wake up to the future costs of that to the economy and to US consumers (and so businesses), US Treasuries could tumble – which would hammer share prices.