As the president says goodbye to the White House, U.S. stocks ended Joe Biden’s tenure on a positive note.
With the S&P 500 SPX up more than 55% since he took office on January 20, 2021, the 46th president of the United States is ending his tenure in the White House. According to Dow Jones Market Data, the tech-heavy Nasdaq Composite COMP surged about 46% during the same time period, while the Dow Jones Industrial Average DJIA increased more than 39%.
However, according to Dow Jones Market Data, the S&P 500 recorded its weakest gains since Barack Obama’s second term between 2013 and 2017, while the Dow and the Nasdaq saw their worst returns since George W. Bush’s second term between 2005 and 2009 (see table below).
Indeed, the COVID-19 pandemic and economic depression worsened in 2021, the year Biden took office. As the world economy started to recover from the epidemic, the major stock averages continued to post double-digit returns by the end of that year, and the Federal Reserve continued to implement supportive monetary policy measures that had been put in place in early 2020.
But in 2022, the U.S. economy struggled with skyrocketing inflation and rising interest rates, and Wall Street had its worst year since the 2008–2009 financial crisis due to Russia’s invasion of Ukraine.
Then, in 2023 and 2024, the artificial intelligence craze and a tech-driven earnings recovery drove U.S. stocks to all-time highs. By the end of 2024, the S&P 500 had achieved consecutive double-digit annual gains and is currently beginning its third year in a bull market.
TradeStation’s global head of market strategy, David Russell, told MarketWatch on Friday that the reopening following the pandemic and the Biden administration’s historic Inflation Reduction Act in 2022 “really spurred industrial activities that in many ways triggered higher interest rates and the bear market of 2022,” resulting in “an explosive surge” in cyclical sectors of the economy.
However, since the AI issue had nothing to do with Biden, it was [a] totally different [tailwind for the market]. Before it materialized in the first few months of 2023, it had been developing for years,” Russell added. Since Donald Trump won the presidential election in early November, Wall Street has been filled with optimism. By lowering financial rules, raising tariffs, and offering tax breaks, investors have been placing bets that the former president’s return to the White House will further boost the economy and corporate America.
However, some of his economic proposals would result in a growing budget deficit and a return to inflation, which might hurt the market for government debt and raise interest rates once more.
Following Trump’s victory on November 5, stocks had a significant surge, but during the next two months, they partially undid their postelection gains. The S&P 500 had its poorest performance at that time since Obama’s election in 2008, rising 3.7% from Election Day to January 17. According to Dow Jones Market Data, the Nasdaq was up 6.5% and the Dow jumped 3% at that time (see graphic below).
“The market surge, which saw risk assets rise and interest rates fall, was the first event to occur in the stock market since the election. The yield curve then became substantially steeper as inflation concerns suddenly returned, according to George Cipolloni, portfolio manager at Penn Mutual Asset Management.
Following a steep selloff in the government-debt market caused by better-than-expected jobs data, which shocked stocks and made investors think that the Fed might have to postpone interest-rate reduction until later this year, Treasury rates spiked last week. The 10-year BX:TMUBMUSD10Y and 30-year BX:TMUBMUSD30Y rates then fell as a result of a big relief rally in equities and bonds that was sparked by a relatively benign consumer-price index data this week.
Cipolloni told BourseWatch over the phone on Friday that “we’ve normalized rates here on the longer end, but every shift up or down in Treasury yields is going to have a magnified effect on the stock market.”
Russell, however, believes that there is “no reason for investors to just assume Trump will do everything in a way that will cause problems” for the economy and financial markets because all of these concerns about tariffs driving up inflation might simply vanish like a “wall of worry.”
Russell and his team think equities could soon emerge from “this period of consolidation” because the market has been “sideways” for the last three months and has been trading around where it settled following Election Day.
“We anticipate double-digit earnings growth in the future. He stated, “We see the new president coming in with executive orders [on deregulations], and we see the Fed setting a dovish expectation and reducing some of these hawkish beliefs that emerged in the last few weeks.” “People who have been sitting on the sidelines might feel that there’s a reason to be getting more involved again.”
On Friday, the last trading day of Biden’s term in office, U.S. markets ended the day higher. Despite a decline in Treasury yields, all three of the main benchmarks reported weekly increases. Additionally, investors were anticipating this week’s second inauguration of Trump as president.
