If you believe the Dow Jones Industrial Average (DJIA) to be a credible gauge of our nation’s economic performance, the United States stock market has performed better during President Barack Obama’s administration than at any other time in our history.
The Dow Jones average had plummeted to 6,547.05 by March 9th, 2009, two months after President Obama was inaugurated into the highest office. It closed at 15,658.36 earlier this month, a Dow Jones Industrial Average all-time record-high, and it has remained above 15,400 all month.
That’s an increase of nearly 9,000 points – almost 140%. Granted, it has taken nearly five years since the crash in September 2008, but 9,000 points in the Dow equates to an estimated $13 Trillion dollars in growth. That is a lot of money.
When President George W. Bush took office in January of 2001, the Dow Jones average was 10,578.24. It reached a then-peak of 14,164.53 on October 9th, 2007 after nearly seven years, before losing over 7,600 points – more than half of its value – by the time it “found the bottom” fifteen months later. Those 7,600 points equate to roughly $11 Trillion dollars lost. That is also a lot of money.
By comparison, the Roaring Twenties saw the Dow Jones average leap from 103.55 points at the dawn of that decade, to 381.17 on September 3rd, 1929 – an increase of nearly 275%. In the fourteen days following Black Tuesday at the end of October, 1929, the stock market lost 1/3 of its value. In two weeks! The Dow Jones average would not reach 381 points again for another quarter of a century, in 1955. That is ten years after the end of World War II.
JFK took office in early 1961 with the Dow Jones average at 634.37. It would fall to 535.76 points in mid-1962 before reaching 732.65 the day before he was assassinated in 1963. That equates to a gain of almost 100 points in almost three years – about 15.5%.
President Nixon presided over a loss of a third of the stock market’s value when he took office from January 1969 to late May 1970, only to then have it grow by two thirds by early 1973 to 1,051.70 points. That was the first time that the Dow Jones Industrial Average broke the then-sky-high 1,000 point threshold.
Unfortunately, the failure of Nixon’s government beat the market downward to 777.30 points by the time of his impeachment, and to 577.60 points by the middle of 1975. Then President Ford‘s administration saw the Dow Jones Industrial Average gain more than 75% of its value back again to 1,014.79 points by late September, 1976. Michigan’s president was very successful under very difficult circumstances.
President Carter‘s term in the highest office was little help to either the Dow Jones average or the U.S. economy (1% gain) in his four years, but President H. W. Bush (46% increase) presided over growth in both. President Reagan‘s eight years in the highest office were very profitable: the Dow was at 950.68 on the day he was inaugurated, and 2,239.11 on the day of his retirement. That 1,288.43 point gain represents a very healthy 135.5% increase in value, and the first time the Dow Jones average reached 1,000 points and remained above that threshold.
Dow records are dismissed by some investors as unimportant because the index comprises just 30 stocks. Many professional investors prefer to follow the Standard & Poor’s 500, which, as the name implies, tracks 500 companies. But the Dow has closely followed the ups and downs of its broader rival over the years, and is a good proxy for how big companies are doing. The S&P 500 is up 128% from its March 9, 2009, low, about the same as the Dow.
This month’s Dow Jones average all-time high is another sign that the nation is slowly healing after the worst economic hardship since the 1930s. It comes as car sales are at a five-year high, home values are rising, the building industry has reawoken, and U.S. companies across a range of industries continue to report big profits. Now if only they would start hiring again.
These stock gains have helped many people’s retirement and investment accounts recover. That, in turn, has helped push U.S. household wealth back nearly to its peak before the Great Recession, although many middle class families are still deep in the hole. The majority of middle-class wealth in the United States is tied up in home values, which are still a third below their peak, and the national unemployment rate remains above 7.5%. How accurately do the stock market indices reflect the health and success of our economy?
In the depths of the recession four years ago, few investors would have predicted such a fast recovery. Some feared another Great Depression. Banks were collapsing, lending was frozen, world trade was plunging, and stocks were in free fall. Americans were losing their savings, their jobs, their homes, and their families. Does the $13 trillion dollars “gained” in the Dow represent real value in American households?
Actually, to be accurate, President Franklin D. Roosevelt took office in early 1933 amidst the depths of the Great Depression. He stepped into the breach like few presidents have in our history, after winning the presidency in a landslide over President Hoover. Despite the despair and calamity wrought by the nation’s economy, President Roosevelt orchestrated the greatest economic turnaround in U.S. history.
The Dow Jones Industrial Average bottomed out at 41.22 points in the Summer of 1932, and was as low as 50.16 soon after President Roosevelt was inaugurated in January, 1933. It peaked at 194.40 just over four years later, in the Summer of 1937. That is a gain of 288%! It wouldn’t reach that height again for another decade, and it took a World War and the United States’ unequaled economic might built thereafter to ultimately wrench us free of disaster’s grip.
So technically, President Obama is the second best thing for the U.S. stock market in its history. I figured that a “Second best” blog title wasn’t nearly as “catchy,” and if recent history serves as any indicator, it doesn’t take very long for historic gains to be lost in a hurry. Do you think our economy and market indices will tank again between now and 2016?
If the Dow Jones average is at record highs, representing $13 trillion dollars added into our national economy since the low of the Great Recession, what are we missing from this “recovery?” How do we ensure the success of our society as a whole? I look forward to hearing your thoughts, and we can get back to Traverse City area real estate again next week.
Enjoy our Heaven on Earth before the snow flies!