It’s rare the executive branch weighs in on equity valuations. But sometimes a president just can’t resist.
Take Tuesday, when Donald Trump said American shares are giving investors “a tremendous opportunity to buy.” Reasonable people can differ on whether it mattered, it’s hardly the first time he’s mentioned stocks, and Trump gets a fair amount of blame lobbed at him for the sell-off as well. Whatever the case: he said it, and the S&P 500 shot up as much as 2.7 percent after four straight days of losses and the worst Christmas Eve trading session ever.
Perhaps the most famous instance of presidential stock prognostication was in March 2009, six days before the financial crisis bottom, when Barack Obama told reporters that “profit-and-earnings ratios are starting to get to the point where buying stocks is a potentially good deal.” His comments came a day after the Dow dropped below 7,000 for the first time since 1997 and the S&P 500 hit its lowest level since October 1996. Even with the recent rout, the S&P 500 is up more than 250 percent since March 2009.
“It is not unheard of to have presidents comment on the stock market, even though it’s not considered to be a good idea. It can actually spook investors,” said Steffen Schmidt, professor of political science at Iowa State University. For his part, Schmidt took Obama’s advice and bought stocks in 2009. “I had my 401k manager buy some best picks. They proved to be a great value,” he said, adding that he bought shares of energy stocks following Trump’s comments, as well.
Trump often talks about the market and uses it as a barometer of his success. Since his election, he’s tweeted about stocks more than 35 times.
“President Trump, unlike previous presidents, has staked much of his economic success on the stock market. It’s not crazy in that sense to encourage people to buy stocks,” said David Primo, associate professor of political science and business administration at the University of Rochester. “It’s atypical for presidents generally, but given the way the president has developed his economic platform, it’s not that unusual.”
Herein, with the help of historians, university professors and Cumberland Advisors, a sampling of market sentiment from presidents past:
Jimmy Carter
President Carter, who was in office from 1977 to 1981, “spread gloom and doom” about the energy crisis that engulfed the nation at the time, said Schmidt. The crisis saw oil prices jump roughly 350 percent thanks, in part, to an OPEC oil embargo.
“I think that until the question of energy is resolved, the uncertainty about this subject and the realization that our excessive imports of oil or adverse balance of trade is going to be permanent, those two things are going to contribute to the deleterious effects of increasing interest rates and also uncertainty in the stock market,” Carter said in 1978.
Ronald Reagan
In October 1987, President Reagan said soaring federal deficits helped trigger one of the largest one-day drops in Dow Jones history, when the index fell nearly 23 percent. Traders dubbed the day "Black Monday."