Obama’s Stock Market Legacy Is Hard to Beat-U.S. stocks delivered ..

Obama’s Stock Market Legacy Is Hard to Beat

U.S. stocks delivered far better returns under Mr. Obama than almost any previous president, and the performance was well ahead of the rest of the worl

Obama’s Stock Market Legacy Is Hard to Beat-U.S. stocks delivered
Traders work on the New York Stock Exchange in November as a television shows President Barack Obama during a news conference. Since Mr. Obama’s took office in 2009, U.S. stocks, including dividends, have returned an average of 16.3% a year. PHOTO: BRENDAN MCDERMID/REUTERS

By JAMES MACKINTOSH

(The Wall Street Journal) –After eight years in office, Barack Obama has a market record any red-blooded American capitalist could be proud of. U.S. shares have soared, oil prices have come down, borrowing is cheap and profits are up along with the dollar. Even those who bet against President Obama made good money, with returns from gold and bonds better than those delivered by shares under his predecessor, George W. Bush.

These aren’t achievements likely to cut much ice with the Democratic Party, and the perception that the rich got richer at the expense of American workers surely helped Donald Trump, who has promised to dismantle Mr. Obama’s flagship policies after he is inaugurated as president on Friday.

Historians, economists and politicians will clash for years over the Obama legacy. But for investors, it has been a great time to bet on America. U.S. stocks delivered far better returns under Mr. Obama than almost any previous president; performance was also well ahead of the rest of the world.

 “Despite the fact that the economy’s been punk, corporate profits became the largest percentage of GDP ever in this cycle,” said Richard Bernstein, chief executive of fund manager Richard Bernstein Advisors. “You can talk about whether that’s social justice or not but that’s not my day job.”

With one day of his presidency to go, the S&P 500 was up 182% from Mr. Obama’s inauguration in January 2009, delivering an annualized return including dividends of 16.3%. In data since 1928, only Bill Clinton produced higher returns. And, if lower inflation under Mr. Obama is taken into account, the real gap is tiny.

John Bilton, global head of multiasset strategy at J.P. Morgan Asset Management, says the main cause of this equity boom was the geyser of money sprayed at the markets by the U.S. Federal Reserve.

“It’s more I would say the Federal Reserve’s legacy that’s given us this period of performance,” he said. “It’s been a phenomenal time to be an investor.”

Others give Mr. Obama more credit, particularly for the tax cuts and spending of the Recovery Act in 2009, but also for resisting pressure to tighten fiscal policy more quickly and leaving the Fed alone.

“The important economic intervention he did was right at the beginning,” said Eric Lonergan, a fund manager at M&G Investments. “And after that he did nothing to disrupt loose monetary and fiscal policy. He could have done a lot of stupid things that he didn’t do.”

The stunning investment returns under Mr. Obama owe a lot to the luck of his timing. He came to office in the midst of the worst recession in generations, when shares were cheap. While prices can always fall further, the 56% peak-to-trough plunge he inherited set a solid base for gains once the recovery began.

While Mr. Obama might not get much credit for the boom, investors who listened to him would have done particularly well. In March 2009, just a week before stocks hit bottom, the new president gave the most contrarian investment advice possible: buy shares.

“Profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it,” he said. He was right. Anyone who bought and held the S&P 500 based on his comments rode one of the biggest bull markets in history, more than tripling their money even before dividends.