Amidst the bad showing for Obamacare, the public outcry over spying, and his popularity rating dipping to new lows, comes some good news for President Obama. As Commander In Chief, Obama has enjoyed a better stock market after re-election than most of his predecessors.
“This year’s 24 percent jump in the Standard & Poor’s 500 Index is the third-biggest annual rally after a president was returned to office since the 1930s, trailing Bill Clinton and Ronald Reagan, according to data compiled by Bloomberg,” reports the news site. Since Obama took office, the index has climbed 108 percent, adding more than $10 trillion in equity market value.
Obama, a Democrat, is actually defying history, which usually shows re-elected Republicans have had better stock market performance, with an average five percent gain in the first year of their second terms. Democrats in comparison usually lose 1.2 percent. The result: 2013 is on course for the best return in a decade despite the recession, government shutdown, and persistent jobs issues.
“Record Federal Reserve stimulus, interest rates around zero percent and a doubling of corporate profits since they fell to a five-year low in 2008 helped sustain stock increases under Obama,” reports Bloomberg. The rally began just after he took office and now exceeds the average length of bull markets by almost a year.
“If you just look at this from a valuation perspective, the market is rich. That doesn’t mean we have to crash, but it does suggest that going forward, your return assumptions for U.S. equities should be much more muted than they have been,” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, said.
So how does the rest of Obama’s term look? According to Lawrence Creatura, a fund manager at Federated Investors Inc., more gains are possible in this bull market with interest rates likely to remain low for the next year and profits forecast to keep climbing.
“This can continue for a long time,” said Creatura. “This isn’t physics, there’s no Newton’s Laws that state how long a bull market has to last,” he said. “If you’re going to forecast a market retracement you’ll have to come up with a reason why earnings will falter.”
Even as economists predict the Fed will begin tapering its stimulus, analysts forecast more earnings growth next year. And Wall Street strategists estimate the S&P 500 will fall in the next two months, slipping 2.4 percent to 1,728 this year, according to the average of 19 estimates compiled by Bloomberg.