The Trump Bull Market Is Far Short of 'Tremendous'

The stock market's gains have been impressive, but hardly unprecedented, during President Donald Trump's first 500 days in office, which ended on Monday. The president, nonetheless, habitually offers hyperbolic statements such as his Jan. 14 tweet that took credit for the "Most explosive Stock Market rally that we’ve seen in modern times," as quoted by Reuters. Using one of Trump's favorite words, market increases during the first 14 months of his term have been "tremendous." From the close on Election Day—Nov. 8, 2016—to its all-time high close on Jan. 26, 2018, the S&P 500 Index (SPX) staged a robust 34% rally, buoyed in large part by investor optimism over Trump's business-friendly policies.

Since then, however, some air has been let out of the balloon, with the S&P 500 brought down by a 10% correction that ran from in late January to early February. Partly due to concerns about tariffs and trade wars initiated by Trump, the index has yet to stage a full recovery, and was 4% below the Jan. 26 high as of the close on June 5.

^SPX Chart

^SPX data by YCharts

How Trump Compares

Looking at the first 500 days in office of the last 20 presidents—or since 1900—LPL Financial measured the gains for the Dow Jones Industrial Average (DJIA) during those periods. Trump comes in sixth place, by a whisker:

President Party Took Office 500-Day DJIA Gain
Franklin D. Roosevelt Democratic 1933 79.8%
George H.W. Bush Republican 1989 31.3%
Calvin Coolidge Republican 1923 26.9%
Warren G. Harding Republican 1921 26.8%
Lyndon B. Johnson Democratic 1963 25.5%
Donald Trump Republican 2017 25.2%
Barack Obama Democratic 2009 24.9%

Source: LPL Financial

Trump does lead all 20 of the most recent presidents with 82 new record highs on the Dow in his first 500 days, per LPL. Johnson is second with 75, and Clinton is third with 46. Roosevelt took office during the Great Depression, while Obama's first term began after the Financial Crisis of 2008.

A Mixed Bag

Trump's policies represent a mixed bag of bullish and bearish moves with respect to the economy and the stock market. The bullish moves tended to predominate through 2017 and into January 2018, propelling stocks upward.

Trump's Bullish Moves - Economy
*Tax Cuts
*Job Growth
*Financial Deregulation
*Economic Deregulation

Source: Investopedia

However, from the stock market peak on Jan. 26 onward, Trump has become increasingly vocal and active regarding another part of his agenda, improving the U.S. balance of trade. His targets have included steel imports, all imports from China, and the NAFTA agreement with Mexico and Canada. These moves threaten to raise costs of production for U.S. companies, disrupt global supply chains, increase prices for U.S. consumers and dampen economic growth in the U.S. and around the world.

Trump's Bearish Moves - Trade Threats, Actions Against Key Targets 

Source: Investopedia

It is no surprise to many observers that, as Trump's bearish moves have come to the fore, investors have become nervous, and stocks have languished.

Looking Ahead

The future of the stock market under Trump depends heavily on sustained GDP and job growth. If the economy, and inflation, appear to be overheating, the Federal Reserve is committed to put on the brakes through interest rate hikes, which would should bring stock prices down. On the other hand, if Trump proceeds with a protectionist agenda on trade that curtails economic growth, that will be an equally negative development for stocks.