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What difference does 100 days make?

By: Mary Fjelstad, senior research analyst

The first 100 days of any US president’s first term in office has become a popular evaluation period for presidential effectiveness. Some see this initial period as a harbinger for the ensuing four years. As we pass the 100-day mark for the Trump administration, I thought it would be interesting first, to compare US stock market performance over Donald Trump’s first 100 days in office to the performance over the same period for the preceding five presidents.[1] Second, I was curious how US equity market performance over the remainder of the first term of each former president compared to the performance over their first 100 days.

While the stock market generally is considered to be forward looking, it is not always accurate in its forecasts, so my expectation was that market performance over the first 100 days of a presidency would not necessarily be consistent with performance over the next four years. As economist Paul Samuelson noted in 1966, “the market has predicted nine out of the last five recessions.”

To conduct my analysis, I used the Russell 3000 Index as the measure of the US equity market since it comprises roughly 98% of total US stock market capitalization. Every president’s first day in office is January 20, so day 100 has always been April 29; however to equalize the sample periods— adjusting for differences in weekends and holidays—I used the first 68 business days beginning January 20 of each inaugural year.

Russell 3000 cumulative performance for the first 100 days of US presidents

 

Source: FTSE Russell. Performance prior to January 1984 is based on simulation. Past performance is no guarantee of future results. Please see the disclaimer for important legal disclosures.

As the chart above shows, US stock market performance for the first 100 days was positive for five of the six administrations in our sample, including Trump; the sole exception being George W. Bush who entered office in the midst of the tech bubble burst of 2001. That’s good news generally for the first 100 days but was there any correspondence with performance over the rest of each term?

The chart below compares the performance of the Russell 3000 for the first 100 days to the performance over the remainder of the first term for the last five presidents. For three presidents, we can see that strong positive performance in the first 100 days was followed by strong performance over the remainder of the first term. For George W. Bush, however, the Russell 3000 performance was negative for his first 100 days and then recorded a small positive performance over the rest of his term. In contrast, while stocks were flat during the first 100 days of the Clinton administration, performance over the remainder of his first term was the highest of the group. Volatility over each period—with the exception of Clinton’s—was fairly equal, ranging from 14.3% to 15.4%; Clinton’s was the least volatile at 9.7%.[2] So on a risk-adjusted basis,[3] the performance during Clinton’s first term was the highest, while under George W. Bush it was the lowest.

Russell 3000 performance for first 100 days compared to the remainder of the first term

Source: FTSE Russell. Past performance is no guarantee of future results. Please see the disclaimer for important legal disclosures.

So can we learn anything from all this? With only five presidential terms under the microscope, these results are not statistically significant, so we cannot say that index performance in the first 100 days is a reliable indicator of the index performance over the remainder of the term. Also, since Reagan’s presidency began in 1980, the Russell 3000 has generally been on an upward trajectory with only a few severe downturns. It isn’t surprising, therefore, that with the exception of George W. Bush’s term, which began in the midst of the dot.com crash, we found positive performance over these periods.

While the Russell 3000 Index as a measure of the broad US stock market has recorded positive performance over the first 100 days of the Trump administration, the stock market is just one of many potential indicators of what might happen over the next four years. The market, as always, will adapt and change as new events occur and new information is absorbed.

For more information on the Russell 3000 Index and the Russell US Index Series, please go here.

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[1] Data for the Russell 1000 Index begins in January 1979.

[2] Source: FTSE Russell. Volatility is measured by annualized standard deviation of monthly returns.

[3] Here I measure risk adjusted performance as the Return – 0%, divided by standard deviation.  This is an alternative risk adjusted measure to the more customary Sharpe Ratio in which the numerator is Return – Cash rate. The cash rate varied significantly across these presidential regimes; here I measure performance relative to a consistent minimum required return of 0%.

 

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