NOVEMBER 26, 2020
Good or just lucky, Joe Biden’s first three weeks in the stock market have been historically solid ones when measured against newly elected presidents of the past.
It’s obviously very early, but the market reality has been the opposite of what Donald Trump predicted for his rival — a crash. Since Election Day, the S&P 500 has surged 7.7%, the second-best gain in 90 years and nearly triple the advance that followed Trump’s 2016 victory. The index has closed at a record three times, and gauges of smaller companies and global assets have hit new highs.
“Markets are looking at Biden’s actions, and so far, they like them,” said Yousef Abbasi, global market strategist at StoneX.
To be sure, the president-elect has been the beneficiary of some fortuitous tailwinds, most notably data suggesting various Covid-19 vaccines hold promise. In the meantime, he’s getting no help from valuations — which at 22 times forward earnings and 2.7 times sales are some of the highest multiples ever recorded — never mind just for a new presidency.
“That combination of relief politically as well as positive surprises on the health-care front really surprised the market in a good way,” said Wayne Wicker, chief investment officer at Vantagepoint Investment Advisers. “Coming into the month, people were quite concerned with the presidential election. I don’t think anybody was planning on such a blockbuster month.”
Trump made the equity market his report card, and by that measure his grades were exceptional, his administration coinciding with a 57% surge in the S&P 500, the sixth-best for a new administration.
Skeptics love to point out that the link between presidents and stock performance is tenuous, that markets usually go up, and that Trump’s S&P 500 record was very similar to his predecessor’s, Barack Obama. All those things are true, though none of them kept him from saying of Biden: “If he’s elected, the stock market will crash,” in front of 60 million debate viewers.
Trump this week, in a brief appearance, touted the Dow Jones Industrial Average’s first-ever rally above 30,000. Along with vaccine optimism, the index was aided by some of Biden’s appointments, mainly Janet Yellen, who’s seen as embracing stimulus as Treasury secretary.
Angelo Kourkafas, investment strategist at Edward Jones, noted that markets are also welcoming of Biden’s more inclusive foreign-policy outlook and are expecting less headline volatility when it comes to trade relations.
“We’ve seen some reduction in political-uncertainty risk,” he said in an interview. “If we are able to maintain the current favorable environment while at the same time reduce some of the headline risk with trade, that’s probably a good outcome for the markets.”