The Dow Jones Industrial Average’s first foray above 40000, though brief, is the latest sign the economy has shrugged off the threat of recession in the midst of retreating inflation and hopes for lower interest rates. It is one bit of welcome news for President Biden, whose approval—and re-election prospects—are being held down by public dissatisfaction with the economy.
On X, Biden called the milestone “great news for Americans’ retirement accounts and another sign of confidence in America’s economy.”
The stock market isn’t the economy, but it is the most prominent, and most frequently updated, benchmark of financial and economic performance. How strong a case, then, does it make for Biden? Superficially, pretty strong. As of Thursday’s close, the Dow is up 28% since he was inaugurated in January 2021—a respectable run. It is also slightly more than where the Dow was at the same point of Donald Trump’s presidency.
This, however, understates how well the market performed under Trump. At this point in his term, stocks had been nosediving as the economy shut down to contain the Covid-19 pandemic. Once the federal government and Federal Reserve flooded the economy with money and businesses reopened, the Dow turned around and shot up, finishing Trump’s term up 57% from the inauguration date.
From Election Day
The performance of both presidents is stronger if measured from Election Day. For example, after the election in 2016, stocks rallied on expectations that a Republican president and Congress would cut taxes and regulations. In 2020, the postelection rally reflected good news on Covid vaccines and expectations of more stimulus. The Dow is up 45% since Biden defeated Trump in 2020. At the equivalent point in Trump’s term, it was up 34%, and it finished his term 70% higher.Stocks are only one part of household wealth, and their ownership is most concentrated among the wealthy. A better measure of financial health is net worth: all assets, including stocks, bonds, cash and property, minus debts. Total household net worth rose 19% through Biden’s first three years in office, according to Federal Reserve data—not much less than the 23% through Trump’s first three years.
Though inflation is falling now, it has been higher on average under Biden than Trump. Adjusted for inflation, net worth was up just 0.7% through Biden’s first three years, compared with 16% through Trump’s first three years.
