Equity Prices and Unemployment Rate – Presidential Trivia
Today’s comment is about how equity prices performed and how the labor market fared during presidential inaugural years in the post WWII period. From Truman to Obama, the U.S. economy was officially in a recession on inauguration day of only two presidents – President Kennedy and President Obama. The recession which began in April 1960 ended in February 1961, shortly after President Kennedy was sworn in. The current recession has been underway for twelve months and could be the longest recession in the post-war period. That said, the U.S. economy entered a recession within twelve months after several other presidents were sworn (see table 1). The discussion ignores periods when presidents have been replaced in the midst of their terms for extraordinary reasons.
The unemployment rate invariably increased at the end of the presidential inaugural year, if the economy entered a recession during the first year of the term, with the exception of Nixon’s 1973 inaugural year. The S&P 500 declined at the end of every presidential inaugural year, if the economy entered a recession in the first year of the term, excluding the Truman term of 1949. By contrast, the S&P 500 climbed 26.3% between December of the Kennedy election year and December of the inaugural year. It is reasonable to conclude that economic factors dictate performance of equity prices and the labor market.
