Whether they adore him or deplore him, US mutual fund investors may understandably be sorry to see B...
Whether they adore him or deplore him, US mutual fund investors may understandably be sorry to see Bill Clinton's presidency end.
Clinton's two terms will go into the books as a period of remarkable stock market gains. From year-end 1992 to year-end 2000, the Standard & Poor's 500 Index returned 17% a year including dividends: a better showing than occurred under all other presidents of the last half century who served at least four years in office.
The next best patrons of prosperity were George Bush the elder (up 15.4% a year, 1988-92); Dwight Eisenhower (up 14.6%, 1952-60), and Ronald Reagan (up 13.9%, 1980-88).
Measuring from the end of August 1974 through the end of December 1976, Gerald Ford's presidency produced a 23.7% annual return for the S&P 500. So those who wish could crown Ford the champ of modern times, though he served less than 2 1/2 years after Richard Nixon resigned.
All other post-World War II presidencies saw single-digit annual returns except for Nixon's, when the S&P 500 fell 6 % a year.
Let's not read cosmic significance into any of these numbers. A president's control over the forces that shape the economy and the markets is much less than either his fans or his foes would have us believe.
For my money, it gets you nowhere to debate how much credit Clinton should receive for the performance of the economy on his watch.
There's no way to figure, for instance, how many points he should be awarded for wisely standing back and letting the Federal Reserve and its chairman, Alan Greenspan, run monetary policy.
How much, in turn, does Greenspan owe his predecessor, Paul Volcker, for getting policy pointed in the right direction after the inflationary shock of the 1970s and early 1980s?
But the record of Clinton's presidency does lead us to one clear conclusion: as a guide to investment decisions, general expectations of what a new president might do once he takes office are useless.
After the Reagan and Bush years, many people on Wall Street looked askance at Clinton in 1992. Cries of "Robin Hood!" rang out, and partisans of aerospace and pharmaceutical stocks in particular ducked for cover. Clinton was going to cut defense spending and socialize health care.
So it is interesting to look back now and see that the Fidelity Select Defense and Aerospace Fund, a serviceable proxy for the military contractors' stocks, returned 19.3% a year from 1992 through 2000, and Fidelity's Select Health Care Fund gained 22.3%. Both handily beat the S&P 500's excellent performance.
Conversely, Clinton came to office as a friend of environmentalism, and still enjoys that same esteem today. Yet the Fidelity Select Environmental Fund struggled to a 3.1% annual return from 1992 through 2000.
You would have been better off in money market funds, which returned about 5% a year, or a bond fund such as the Vanguard Long Term Corporate Bond Fund, which averaged a 7.3% annual return in the Clinton years.
There are many ways to look at all this. One letter writer to the New York Times proclaimed the other day, "President Clinton's legacy will be deficit reduction, bravely achieved by a tax increase, which freed the economy to achieve spectacular growth."
Averred another letter published adjacently, "With free trade, deficit reduction and downsizing welfare, he succeeded in transforming the Democrats into Republicans."
Myself, I'd give a big slug of the credit for today's budget surplus to neither Democrats nor Republicans, but to the securities markets themselves, and the financial boom that supersized capital gains tax payments and other government revenue. In a contest of wills between free markets and politicians, bet on markets every time.
That brings us up to the present, with President-elect Bush and all the guessing how he might influence the investment outlook.
He is a friend of the energy industry, right? His tax plans will help the financial services industry, won't they? Thanks, but I'll pass.
Chet Currier in the Bloomberg New York newsroom
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