The following is an excerpt from What to Do Now If You’re Losing Sleep Over the Stock Market, originally published by Kiplinger’s.
As discussed ad nauseam in the financial press and in mutual fund literature, stocks “always” rise over the long-term.
This may very well continue to be true. But you also should remember that you have limited amounts of capital, and your cash might be better invested elsewhere.
Stocks are not the only game in town.
Even after the recent selloff, the S&P 500 still trades at a cyclically adjusted price-to-earnings ratio (“CAPE,” which measures the average of 10 years’ worth of earnings) of 27, meaning that this is still one of the most expensive markets in history. (Other metrics, such as the price-to-sales ratio, tell a similar story.)
This doesn’t mean that we “have” to have a major bear market, and stock returns may be soundly positive in the coming years. But it’s not realistic to expect the returns over the next five to 10 years to be anywhere near as high as the returns of the previous five to 10 years, if we’re starting from today’s valuations. History suggests they’ll be flattish at best.
It’s not hard to find five-year CDs these days that pay 3.5% or better. That’s not a home run by any stretch, but it is well above the rate of inflation and it’s FDIC-insured against loss.
High-quality corporate and municipal bonds also sport healthy yields these days.
And beyond traditional stocks, bonds and CDs, you should consider diversifying your portfolio with alternative investments or strategies. Options strategies or commodities futures strategies might make sense for you. Or if you want to get really fancy, perhaps factored accounts receivable, life settlements or other alternative fixed-income strategies have a place in your portfolio. The possibilities are limitless.
Obviously, alternatives have risks of their own, and in fact might be riskier than mainstream investments like stocks or mutual funds. So you should always be prudent and never invest too much of your net worth into any single alternative strategy.
Just keep in mind that “investing” doesn’t have to mean “stocks.” And if you see solid opportunities outside of the market, don’t be afraid to pursue them.
To read the rest, please see What to Do Now If You’re Losing Sleep Over the Stock Market
This article first appeared on Sizemore Insights as What to Do Now If You’re Losing Sleep Over the Stock Market
The following is an excerpt from The 5 Best Investments You Can Make in 2019
Everyone is looking forward to 2019 if only because 2018 has been so ugly. But investors will have to mentally sturdy themselves: Before we can talk about the best investments to make in 2019, we have to quickly explore what has gone wrong in 2018.
The year started with a bang. The Standard & Poor’s 500-stock index returned nearly 6% that month following an epic 2017 that saw the index pop by 22%. But after that, it got rocky. Stocks stumbled in the first quarter, rallied for most of the second and third quarters, then rolled over and died again in October. It hasn’t gotten better since, and investors have had plenty to digest the whole way.
Much of the massive gain in 2017 was likely powered by investors looking forward to the profit windfall following the corporate tax cuts at the end of last year. But that’s a year in the past. Going forward, we’ll be comparing post-tax-cut profits to post-tax-cut profits as opposed to higher post-cut to lower pre-cut. Meanwhile, stock prices are still priced for perfection. At 2 times sales, the S&P 500’s price-to-sales ratio is sitting near all-time highs, and the cyclically adjusted price-to-earnings ratio, or “CAPE,” of 29.6 is priced at a level consistent with market tops.
Fortunately, the new year provides an opportunity to wipe the slate clean. So what might we expect in the new year? Today, we’ll cover five of the best investments you can make in 2019, come what may in the stock market.
It’s difficult to beat the stock market as a long-term wealth generator. At roughly 7% annualized returns after inflation, the market has historically doubled your inflation-adjusted wealth every 10 years. No other major asset class has come close.
Still, you shouldn’t put all of your money in the stock market.
To start, there is no guarantee that the future will look like the past. The stock market as an investment destination for the masses is a relatively new concept that really only goes back to the 1950s, or perhaps the 1920s if you want to be generous. You can’t credibly say that the market “always” rises with time because, frankly, we’re writing history as we go.
Bonds have a longer track record, but bonds are also priced to deliver very modest returns in the years ahead. Adjusted for inflation, the 3% yield on the 10-year Treasury looks a lot more like a 1% yield.
Investors should consider alternative strategies as a way to diversify while not sacrificing returns.
“Alternative” can mean different things to different investors, but for our purposes here we’re taking it to mean something other than traditional stocks and bonds. Alternatives could include commodities, precious metals and even cryptocurrencies like Bitcoin. But more than exotic assets, an alternative strategy can simply use existing, standard assets in a different way.
“The vast majority of options contracts expire worthless,” explains Mario Randholm, founder of Randholm & Company, a firm specializing in quantitative strategies. “So, a conservative strategy of selling out-of-the-money put and call options and profiting from the natural “theta,” or time decay, of options is a proven long-term strategy. You have to be prudent and have risk management in place, as the strategy can be risky. But if done conservatively, it is a consistent strategy with low correlation to the stock market.”
That’s a more advanced way to skin the cat. But the key is to keep your eyes open for alternatives with stock-like returns that don’t necessarily move with the stock market.
To continue reading the remaining four investments, see The 5 Best Investments You Can Make in 2019
This article first appeared on Sizemore Insights as The 5 Best Investments You Can Make in 2019
With one quarter left to go in 2018, there are three things on investors’ minds: the Fed, the coming mid-term elections and the ongoing trade war. Thus far, the market has mostly shrugged off these concerns, though income-focused investments such as bonds, REITs and dividend-paying stocks have had a hard time gaining traction.
Sizemore Capital’s Dividend Growth portfolio, which invests primarily in higher-yielding securities, has also had a hard time gaining traction in 2018. The portfolio returned 0.14% in the third quarter and 0.53% in the year-to-date through September 30. This compares to 7.2% in the third quarter and 9.0% year-to-date for the S&P 500 and 5.1% and 1.6% for the S&P 500 Value. [Returns data calculated from the performance of Sizemore Capital’s Dividend Growth model at Interactive Brokers; past performance is no guarantee of future results.]
Given its focus on attractively-priced stocks paying above-market dividend yields, I consider the S&P 500 Value to be a more accurate benchmark than the standard S&P 500. And frankly, it’s been a difficult market for value strategies.
Value vs. Growth
Over time, value strategies have proven to outperform.
This is not my opinion. This is empirical fact. In their landmark 1993 paper, University of Chicago professors Eugene Fama and Kenneth French found that value stocks outperform over time. More recent research by BlackRock found that in the 90 years through 2017, value has outperformed growth by a full 4.8% per year.
Figure 1: Value vs. Growth
But while value trounces growth over time, 90 years is a long time to wait. And there are stretches – sometimes long stretches – where value underperforms badly. We’re in one of those stretches today.
Figure 1 illustrates this in vivid detail. The graph shows the ratio of the Russell 1000 Value index divided by the Russell 1000 Growth index. When the line is declining, growth is outperforming value. When the line is rising, value is outperforming growth.
Value massively outperformed growth from 2000 to 2007, but it has struggled ever since. This has been particularly true over the past two years as the “FAANG” stocks – Facebook, Amazon, Apple, Netflix and Google (Alphabet) – have completely dominated the investing narrative.
I would love to tell you the exact date when the market will flip and value will start to dominate again. For all I know, by the time you read this, it might have already happened. Or that day might still be years away.
That’s not something I can control. But I can stay disciplined and focus on high-quality companies that I believe to be temporarily underpriced. And because my strategy has a strong income component, we don’t necessarily need prices to rise in order for us to realize a respectable return. The average dividend yield of the stocks in the Dividend Growth portfolio is 5.65% at time of writing. [This yield will change over time as the composition of the portfolio changes.]
As we start the fourth quarter, I am particularly bullish about some of our newer additions, such as Macquarie Infrastructure Company (NYSE: MIC) and Ares Capital (Nasdaq: ARCC).
Macquarie Infrastructure lowered its dividend earlier this year, which led investors to dump it in a panic. The shares dropped by over 40%, giving us a very attractive entry point.
Ares Capital, like many BDCs, has found the past decade to be difficult. But after a long, six-year drought, the company raised its dividend in September, and I expect further dividend hikes to come. At current prices, the shares yield a whopping 9.0%.
I also continue to see value in some of our long-held energy infrastructure assets, such as Energy Transfer Equity (NYSE: ETE) and Enterprise Products Partners (NYSE: EPD). Energy Transfer, in particular, is attractive due to its planned merger with is related company Energy Transfer Partners (NYSE: ETP). I believe this could be the first step to an eventual conversion from an MLP to a traditional C-corporation, which would potentially lower ETE’s cost of capital and allow for greater ownership by mutual funds, institutional investors and retirement plans like IRAs. CEO Kelcy Warren has indicated that this is the direction he ultimately wants to go.
I see the greatest risk in the portfolio coming from our positions in automakers General Motors (NYSE: GM), Ford Motor Company (NYSE: F) and Toyota (NYSE: TM). I consider all three to be wildly attractive at current valuations, but all are also at risk to fallout from the escalating trade war. As a precaution, I lowered our exposure to the sector earlier this year by selling shares of Volkswagen. But given the potential for a rally in the shares following a favorable resolution to the trade war, I feel it makes sense to hold our remaining auto positions and potentially add new money to them on any additional pullbacks.
All Eyes On the Fed
The Federal Reserve raised rates again in September, which was widely expected. But it was a subtle change to their statement that raised some eyebrows. They dropped the language saying that its policy “remained accommodative.” Does this mean that the Fed believes easy money is already over and that they’re not much more tightening to be done? Or does it mean that they’re about to get even more hawkish?
The statement was ambiguous. But it is noteworthy that the Fed is still forecasting another hike before the end of the year and three more in 2019. And Powell’s statements following the official statement suggest that he’s eager to continue draining liquidity out of the market.
There are limits to how aggressive the Fed can be here. If they follow through with raising rates as aggressively as they plan, they will push short-term rates above longer-term rates, inverting the yield curve. I don’t see the Fed risking that, as an inverted yield curve is generally viewed as a prelude to a recession.
Figure 2: 10-Year Treasury Yield
Meanwhile, bond yields have finally pushed through the long trading range of the past six years. The 10-year Treasury yield broke above 3.2%, a level it hasn’t seen since 2011.
I do not expect yields to rise much above current levels, as I do not see such a move justified by current inflation rates or growth expectations. But this is something I am watching, because the Dividend Growth portfolio, given its yield-focused strategy, is sensitive to changes in bond yields.
Looking forward to a strong finish to the year,
Charles Lewis Sizemore, CFA
Asness is the billionaire co-founder of AQR Capital Management and a pioneer in liquid alternatives. For all of us looking to build that proverbial better mouse trap, Asness is our guru. My own Peak Profits strategy, which combines value and momentum investing, was inspired by some of Asness’ early work.
Unfortunately, he’s been getting his butt kicked lately. His hedge funds have had a rough 2018, which prompted him to write a really insightful and introspective client letter earlier this month titled “Liquid Alt Ragnarok.”
“This is one of those notes,” Asness starts with his characteristic bluntness. “You know, from an investment manager who has recently been doing crappy.”
Rather make excuses for a lousy quarter (Asness is above that), he uses his bad streak to get back to the basics of why he invests the way he does.
As I mentioned, Asness specializes in liquid alternatives. In plain English, he builds portfolios that aren’t tightly correlated to the S&P 500. They’re designed to generate respectable returns whether the market goes up, down or sideways.
You don’t have to be bearish on stocks to see the value of alts. As Asness explains,
You do not want a liquid alt because you’re bearish on stocks or, more generally, traditional assets. That kind of timing is difficult to do well. Plus, if you’re convinced traditional assets are going to plummet, you want to be short, not “alternative.” In other words, liquid alts are a “diversifier” not a “hedge.”
You should invest [in a liquid alt] because you believe that it has a positive expected return and provides diversification versus everything else you’re doing. It’s the same reason an all-stock investor can build a better portfolio by adding some bonds, and an all-bond investor can build a better portfolio by adding some stocks.
I love this, so you’re going to have to forgive me if I “geek out” a little bit here. My professors pretty well beat this stuff into my head when I was working on my master’s degree at the London School of Economics.
When you invest in multiple strategies that aren’t tightly correlated with each other, your risk and returns are not the average risk and return of the individual strategies. The sum is actually greater than the parts. You get more return for a given level of risk or less risk for a given level of return.
Take a look at the graph. This is a hypothetical scenario, so don’t get fixated on the precise numbers. But know that it really does work like this in the real world.
Strategy A is a relative low risk, low return strategy. Strategy B is higher return, higher risk.
In a world where Strategies A and B are perfectly correlated (they move up and down together), any combination of the two strategies would be a simple average. If A returned 2% with 8% volatility and B returned 16% with 11% volatility, a portfolio invested 50/50 between the two would have returns of 9% with 9.5% volatility. That is what you see with the straight line connecting A and B. Any combination of the two portfolios would fall along that line (assuming perfect correlation).
But if they are not perfectly correlated (they move at least somewhat independently), you get a curve. And the less correlation, the further the curve gets pushed out.
Look at the dot on the curve that shows an expected return of about 8% and risk (or volatility) of 10%. On the straight line, that 8% curve would have volatility of about 14%, not 10%. And accepting 10% volatility would only get you a return of about 4% on the straight line.
This is why you diversify among strategies. Running multiple good strategies at the same time lowers your overall risk and boosts your returns. The key is finding good strategies that are independent. Running the basic strategy five slightly different ways isn’t real diversification, and neither is owning five different index funds in your 401k plan. Diversification is useless if all of your assets end up rising and falling together.
This article first appeared on Sizemore Insights as Why You Shouldn’t Put ALL Your Money into an Index Fund
The following is an excerpt from Best ETFs for 2018: This Isn’t the Year for Emerging Markets (DVYE).
Well, I should probably start this by mentioning that I no longer personally own the ETF I recommended in InvestorPlace’s Best ETFs for 2018 contest.
I recently sold my shares of the iShares Emerging Markets Dividend ETF (DVYE). While I still believe that emerging markets are likely to be one of the best-performing asset classes of the next ten years, it’s a minefield in the short-term. As I write this, the shares are down 4% on the year. That’s not a disaster by any stretch, but it is a disappointment.
There are a couple reasons for the recent underperformance in emerging markets. To start, the U.S. market remains the casino of choice for most investors right now. Adding to this is dollar strength. While dollar strength is good for countries that sell manufactured products to the United States, it’s bad for commodities producers, as a more expensive dollar by definition means cheaper commodities.
President Donald Trump’s trade war isn’t helping either. While it’s hard to argue that anyone truly “wins” a trade war, Trump isn’t incorrect when it says that our trading partners need us more than we need them. In a war of attrition like this, you “win” by losing less.
Of course, these conditions are not new, and virtually all of them were in place when I made the initial recommendation of DVYE. None of these factors would be enough for me to punt on emerging markets just yet. No, the problem is a greater risk that has only recently popped up: the twin meltdowns in Argentina and Turkey.
To continue reading, please see Best ETFs for 2018: This Isn’t the Year for Emerging Markets (DVYE).
This article first appeared on Sizemore Insights as Best ETFs for 2018: This Isn’t the Year for Emerging Markets (DVYE)
The following is an excerpt from Best Stocks for 2018: Enterprise Products Is a Keeper.
A 14% return is nothing to be ashamed of in a year where the S&P 500 is up only 8%. Yet it looks awfully meager when my competition in the Best Stocks contest is up 144%.
As I write, my submission in InvestorPlace’s Best Stocks for 2018 contest — blue-chip natural gas and natural gas liquids pipeline operator Enterprise Products Partners (EPD) — is up 14%, including dividends, as of today. Yet Tracey Ryniec’s Etsy (ETSY) is up a whopping 144%. Chipotle Mexican Grill (CMG) and Amazon.com (AMZN) take the second and third slots with returns to date of 71% and 68%, respectively.
So, barring something truly unexpected happening, it’s looking like victory may be out of sight this time around.
Can’t win ‘em all.
While Enterprise Products may finish the contest as a middling contender, I still consider it one of the absolute best stocks to own over the next two to three years. Growth stocks have dominated value stocks since 2009, but that trend will not last forever. Value and income stocks will enjoy a nice run of outperformance — and when they do, Enterprise Products will be a major beneficiary.
To continue reading, please see Best Stocks for 2018: Enterprise Products Is a Keeper.
This article first appeared on Sizemore Insights as Best Stocks for 2018: Enterprise Products Is a Keeper
Our fearless leaders in congress don’t always get it right. If fact, I’d go so far as to say they generally make a royal mess of things.
But when they created the 401k plan in 1978, they created the single best tax shelter and asset protection tool in U.S. history. And importantly, they made it available to ordinary Americans and not only the superrich. It’s no exaggeration to say that the humble 401k offers better tax savings and lawsuit protection than even the most complex (and expensive) offshore trust scheme.
In 2018, you can defer a maximum of $18,500 of your income ($24,500 if you are 50 or older) and stuff it into your 401k account, not including any employer matching. Depending on how generous your employer is, matching and profit sharing can add thousands of additional dollars to your account every year.
Let’s play with the numbers. If you and your spouse are in the 24% tax bracket (combined annual income of $165,000 to $315,000), contributing the full $18,500 apiece amounts to $8,880 in tax savings. That’s real money, and it adds up fast.
You should make every reasonable effort to max out your 401k every year. But if the shekels are tight and you’re having a hard time making ends meet on a reduced paycheck, I have a little trick for you.
Dollars are Fungible
The thing you should always remember is that your cash is fungible. A dollar in your left pocket is no different than a dollar in your right pocket. With this in mind, you can “convert” taxable savings sitting in your bank account to tax-deferred savings in your 401k.
You can’t literally move money from your checking account to max out your 401k, of course, as the funds have to come out of your paycheck. But this comes back to what I said about money being fungible. If you have cash savings sitting in the bank, you can live off of it for a few months while you dump your entire paycheck into the 401k plan. Once your contribution is maxed out for the year, you go back to living off of your paycheck. The net result is that you will have moved your cash savings from a taxable account to a tax-free account.
Unlike IRA contributions, which can be made up until the tax filing deadline in the following year, 401k contributions have to be made during the current calendar year. So, if you want to save money on your 2018 taxes, you need to make the contributions before December 31.
If you have taxable cash on had that you want to “convert” to tax-free 401k money, you still have time to do it this year. But time is getting short, so if you’re going to make a move you should do it now.
This article first appeared on Sizemore Insights as A Stealthy Way to Max Out Your 401(k) for the Year
I joined Peggy Tuck today on Straight Talk Money, and at the top of the agenda was Elon Musk and Tesla (TSLA). Tesla reported its worst loss in history, yet shares rallied hard as a more conciliatory Musk promised profits in the quarters ahead.
Musk, by the way, was the inspiration for Robert Downey Jr.’s Iron Man character from the Avengers movies. It’s debatable whether that makes Tesla stock worth buying.
In the next segment, we talk about Apple’s (AAPL) epic rise to $1 trillion… and whether it makes sense for billionaires like Amazon’s (AMZN) Jeff Bezos to keep substantially all of their net worth in their own company. My answer might surprise you.
In the final segment, we chat about the best places to invest should inflation make a comeback and look at a list of 10 stocks that have recently raised their dividends by at least 10%.
This article first appeared on Sizemore Insights as Today on Straight Talk Money: Elon Musk’s Tesla Turnaround and More
A more comprehensive version of this article covering all presidents back to 1889 was originally published on Kiplinger’s.
Mount Rushmore features massive 60-foot-tall busts of celebrated presidents George Washington, Thomas Jefferson, Abraham Lincoln and Theodore Roosevelt, each chosen for their respective roles in preserving or expanding the Republic.
But if you were to make a Mount Rushmore for presidents based on stock market performance, none of these men would make the cut. There really was no stock market to speak of during the administrations of Washington, Jefferson and Lincoln, and Teddy Roosevelt ranks as one of the worst-performing presidents of the past 130 years. In his nearly eight years in office, the Dow returned a measly 2.2% per year.
Just for grins, let’s see what a “stock market Mount Rushmore” might look like. And while we’re at it, we’ll rank every president that we can realistically include based on the available data.
Naturally, a few caveats are necessary here. The returns data you see here are price only (not including dividends), so this tends to favor more recent presidents. Over the past half century, dividends have become a smaller portion of total returns due to their unfavorable tax treatment.
Furthermore, the data isn’t adjusted for inflation. This will tend to reward presidents of inflationary times (Richard Nixon, Jimmy Carter, Gerald Ford, etc.) and punish presidents of disinflationary or deflationary times (Franklin Delano Roosevelt, George W. Bush, Barack Obama, etc.)
And finally, presidents from Hoover to the present are ranked using the S&P 500, whereas earlier presidents were ranked using the Dow Industrials due to data availability.
That said, the data should give us a “quick and dirty” estimate of what stock market returns were like in every presidential administration since Benjamin Harrison. (He ranks near the bottom, by the way, with losses of 1.4% per year).
|President||First Day in Office||Last Day in Office||Starting S&P 500*||Ending S&P 500*||Cumulative Return||Days||CAGR|
|* Dow Industrials used prior to President Herbert Hoover |
^ Data though 7/2/2018
|Calvin Coolidge||August 3, 1923||March 3, 1929||87.20||319.12||265.96%||2039||26.14%|
|Bill Clinton||January 20, 1993||January 19, 2001||433.37||1342.54||209.79%||2921||15.18%|
|Barack Obama||January 20, 2009||January 19, 2017||805.22||2263.69||181.13%||2921||13.79%|
|Donald Trump^||January 20, 2017||July 2, 2018||2271.31||2703.89||19.05%||528||12.81%|
|William McKinley||March 4, 1897||September 13, 1901||30.28||49.27||62.68%||1665||11.26%|
|George H.W. Bush||January 20, 1989||January 19, 1993||286.63||435.13||51.81%||1460||11.00%|
|Dwight Eisenhower||January 20, 1953||January 19, 1961||26.14||59.77||128.65%||2921||10.89%|
|Gerald Ford||August 9, 1974||January 19, 1977||80.86||103.85||28.43%||894||10.76%|
|Ronald Reagan||January 20, 1981||January 19, 1989||131.65||286.91||117.93%||2921||10.22%|
|Harry Truman||April 12, 1945||January 19, 1953||14.20||26.01||83.17%||2839||8.09%|
|Lyndon Johnson||November 22, 1963||January 19, 1969||69.61||102.03||46.57%||1885||7.68%|
|Warren Harding||March 4, 1921||August 2, 1923||75.11||88.20||17.43%||881||6.88%|
|Jimmy Carter||January 20, 1977||January 19, 1981||102.97||134.37||30.49%||1460||6.88%|
|John Kennedy||January 20, 1961||November 21, 1963||59.96||71.62||19.45%||1035||6.47%|
|Franklin Roosevelt||March 4, 1933||April 12, 1945||6.81||14.05||106.31%||4422||6.16%|
|Woodrow Wilson||March 4, 1913||March 3, 1921||59.13||75.23||27.24%||2921||3.06%|
|Theodore Roosevelt||September 14, 1901||March 3, 1909||51.29||60.50||17.95%||2727||2.23%|
|William Howard Taft||March 4, 1909||March 3, 1913||59.92||59.58||-0.56%||1460||-0.14%|
|Benjamin Harrison||March 4, 1889||March 3, 1893||40.07||37.82||-5.61%||1460||-1.43%|
|Richard Nixon||January 20, 1969||August 8, 1974||101.69||81.57||-19.78%||2026||-3.89%|
|Grover Cleveland||March 4, 1893||March 3, 1897||37.75||30.86||-18.25%||1460||-4.91%|
|George W. Bush||January 20, 2001||January 19, 2009||1342.90||850.12||-36.70||2921||-5.55%|
|Herbert Hoover||March 4, 1929||March 3, 1933||25.49||5.84||-77.08%||1460||-30.82%|
At the very top of the list is Calvin Coolidge, the man who presided over the boom years of the Roaring Twenties. Coolidge, a hero among small-government conservatives for his modest, hands-off approach to government, famously said “After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world.”
It was true then, and it’s just as true today.
In Coolidge’s five and a half years in office, the Dow soared an incredible 266%, translating to compound annualized gains of 26.1% per year.
Of course, the cynic might point out that Coolidge was also extraordinarily lucky to have taken office just as the 1920s were starting to roar… and to have retired just as the whole thing was starting to fall apart. His successor Hoover was left to deal with the consequences of the 1929 crash and the Great Depression that followed.
The second head on Rushmore would be that of Bill Clinton. Clinton, like Coolidge, presided over one of the largest booms in American history, the 1990s “dot com” boom. And Clinton, particularly during the final six years of his presidency, was considered one of the more business-friendly presidents by modern standards.
The S&P 500 soared 210% over Clinton’s eight years, working out to annualized returns of 15.2%.
Not far behind Clinton is Barack Obama, who can boast cumulative returns of 181.1% and annualized returns of 13.8%. President Obama had the good fortune of taking office right as the worst bear market since the Great Depression was nearing its end. That’s fantastic timing. All the same, 181% cumulative returns aren’t too shabby.
Interestingly, the infamous “Trump rally” places Donald Trump as the fourth head on Mount Rushmore with annualized returns thus far of 12.8% It’s still early, of course, as President Trump is not even two years into his presidency. And given the already lofty valuations in place when he took office, it’s questionable whether the market can continue to generate these kinds of returns throughout his presidency. But he’s certainly off to a strong start.
After Trump, the next four presidents – William McKinley, George H.W Bush, Dwight Eisenhower and Gerald Ford – are clumped into a tight band, each enjoying market returns of between 10.8% and 11.3%. And the top 10 is rounded out by Ronald Reagan and Harry Truman, with annualized returns of 10.2% and 8.1%, respectively.
We’ve covered the winners. Now let’s look at the losers; the “Mount Rushmore of Stock Market Shame,” if you will.
Herbert Hoover occupies the bottom rung with a truly abysmal 77.1% cumulative loss and 30.8% annualized compound loss. In case you need a history refresher, Hoover took office just months before the 1929 crash that ushered in the worst bear market in U.S. history.
Don’t feel too sorry for Hoover, however. 1,028 economists signed a letter warning him not to sign the Smoot Hawley Tariffs into law… yet he did it anyway. This helped to turn what might have been a garden variety recession into the Great Depression. That’s on you, Hoover.
In second place is George W. Bush, with annualized losses of 5.6%. Poor W had the misfortune of taking office just as the dot com boom of the 1990s went bust and shortly before the September 11, 2001 terror attacks helped to push the economy deeper into recession. And if that weren’t bad enough, the 2008 mortgage and banking crisis happened at the tail end of his presidency.
Sandwiched between two of the worst bear markets in U.S. history, poor W never had a chance.
Rounding out the Mount Rushmore of Stock Market Shame are Grover Cleveland and Richard Nixon with annualized losses of 4.9% and 3.9%, respectively.
Nixon’s presidency was marred by scandal and by the devaluation of the dollar, neither of which was good for market returns.
Poor Cleveland, on the other hand, was just unlucky. By any historical account, he was a responsible president who ran an honest and fiscally sound administration. But then the Panic of 1893 hit the banking system and led to a deep depression. The fallout was so bad that it actually led to a grassroots revolt and to a total realignment of the Democratic Party. After Cleveland fell from grace, the mantle of leadership shifted to Progressives Woodrow Wilson and William Jennings Bryan, and the rest is history.
To see the full rankings of all presidents since 1889, see The Best and Worst Presidents (According to the Stock Market)
This article first appeared on Sizemore Insights as The Top 10 Presidents of All Time (At Least According to the Stock Market)