According to the Bespoke Investment Group, the S&P 500 has grown by more than 50% since the election of Donald Trump in 2016 as U.S. President, more than double the average growth rate of this index of 23% under the three-year rule of other presidents.
The highest growth occurred in the third year at the post, in the second year, and more precisely at the end of 2018, there was the largest decline in the S&P 500 — a drop of 6.2%, compared with the average increase of 4.5% attributable to the service of other presidents. The comparison can be seen clearly in the graph below. The first year of the presidency of Trump (2016-2017)
Growth in Trump’s first year was about three times higher than the average for other presidents: the S&P 500 added 19.4% compared with an average of 5.7%.
Enterprises received great help and incentive for growth after the tax review in 2017, when companies bought a record number of shares for extra money.
The second year of Trump’s presidency
The low value on the chart is explained by the worst December (2018) that the stock market has experienced since the Great Depression amid the intensified US-Chinese trade war and higher rates from the Federal Reserve.
The third year of Trump’s presidency
The S&P 500 index grew by 29% this year, which is much higher than the average for the third year, which was the previous US Presidents (12.8%).
Despite the volatility resulting from the trade war between the United States and China, 2019 was the year of record highs for major stock indices. Last week, the S&P 500 reached a historical mark of 3200.
While business investment has fallen due to the uncertainty of US trade relations with China, stock market investors continue to actively invest in stocks.
The market has also received great incentive thanks to a cut in interest rates by the Federal Reserve three times this year, accompanied by sharp criticism from Fed chairman Jerome Powell on the part of Trump, who considered these steps slow and weak, saying that he would like to see the central bank zero rates.
The Fed lowered rates on fears of a slowdown in global economic growth and growth in the country, but after the last meeting it made it clear that no further rate cuts are expected in 2020.
Stable economic growth is supported by the lowest unemployment rate since 1969 at 3.5%. The Americans not only received high employment, but, in turn, returned funds to the economy through purchases. In addition, strong consumer spending offset a slight decline in production growth.
Strong consumer ability for economists also looked convincing when there were concerns about the bond market. In September, the yield of short-term bonds rose above long-term, which led to an inversion of the yield curve, a phenomenon known as the precursor of the recession. However, since then, the curve intensified and no longer repeated such signals.
The growth of the S&P 500 in the third year of the Trump presidency is above average, but not the best. In 2013, during the third year of the presidency of Barack Obama, the index grew by more than 32%.
Will there be strong growth in Trump’s fourth year?
Analysts point out that this will depend on trade agreements with China. Earlier this month, countries announced the “first phase” of a trade agreement, under which China agreed to buy billions of dollars of US agricultural products, and the US agreed to cancel a new round of duties.
For the most part, stocks ignored the news due to a lack of clarity and uncertain timing for a full-scale trade agreement.
While Trump is confident in a strong market next year, Wall Street predicts a much more modest increase. Analysts average forecast for S&P 500 to reach the level of 3330.