In the USA, you usually look to the stock market as a barometer of how the economy is doing. The S&P 500 index is considered one of the most reliable indicators of the performance of major American stocks and the stock market as a whole. In this post, I’ll examine how the S&P 500 is performing under current President Joe Biden and how it performed under former President Donald Trump.
What Is the S&P 500?
“The index measures the performance of the large-cap segment of the U.S. market. Considered to be a proxy of the U.S. equity market, the index is composed of 500 constituent companies.” Source: S&P Global
It contains household names such as Apple, Microsoft, Amazon, Meta (Facebook), Alphabet (Google), Nvidia, Tesla and Johnson & Johnson.
A Short History of the Index
In 1923, the Standard Statistics Company created a stock market index consisting of 233 U.S. company stocks. In 1926, it created an index with 90 stocks.
Fifteen years later, in 1941 during WWII, Poor’s Publishing merged with Standard Statistics Company. The new company was and still is known as known as Standard & Poor’s.
The index was expanded from 90 stocks to 500 and so, the Standard & Poor’s 500 Stock Composite Index (S&P 500) was created in March 1957.
Who Owns the S&P 500?
The S&P Dow Jones Indices maintains the S&P 500. It is a joint venture between S&P Global, the CME Group, and News Corp with S&P Global having a controlling stake.
Selection Criteria for the S&P 500
Some of the selection criteria that a company must meet to be included in the S&P 500 are as follows:
- Market Cap: Since 2nd January 2024, the required total market capitalisation must be USD 15.8 billion or more.
- Domicile: Must be domiciled in the US and be listed on a US stock exchange e.g. NYSE or NASDAQ.
- Liquidity: A float-adjusted liquidity ratio (FALR), (the annual dollar value traded divided by the float-adjusted market capitalization), must be greater than or equal to 0.75.
- Organisation type and Share type: The issuing company must be a corporation (including equity and mortgage REITs) and the share type must be common stock.
- Earnings: A positive sum of the most recent four consecutive quarters of trailing earnings and positive earnings for its most recent quarter.
How To Invest in the S&P 500
You can invest in the S&P 500 by investing in an index fund or an exchange-traded fund for example.
President Joe Biden and former President Donald Trump
| President | Party | Term Served |
| Joe Biden | Democrat | 2021 – present |
| Donald Trump | Republican | 2017-2021 |
37 months of the US Presidency – Biden vs. Trump
I have taken data for the first 37 months of Joe Biden’s presidency to compare and contrast how the S&P 500 performed versus when Donald Trump was President.
To help you understand the data:
“Each series begins with the closing value of the month of inauguration and runs to the closing value of the last month of the term. The y-axis shows the total percentage increase or decrease in the S&P 500 and the x-axis shows the term length in months”. Source: Macrotrends
S&P 500 Performance
- After their first 12 months in office, the S&P was up 23.9% under Trump (Rep.) vs up 21.6% under Biden (Dem.)
2. After their first 24 months, the S&P 500 was up 18.7% under Trump vs up 9.8% under Biden.
3. After their first 36 months, the S&P 500 was up 41.5% under Trump vs up 30.5% under Biden.
Looking at the % change in the S&P 500, you can see that it performed much better under Trump than under Biden for the first 36 months of their presidencies.
4. However, things change at 37 months when the S&P 500 increased by 34.8% (Biden) vs 29.6% (Trump). So, what happened?
37 months into Trump’s presidency was around February 20th, 2020. This was right at the start of the COVID-19 pandemic.
You can see from the graph below how the S&P 500 dropped from 3,521 in February 2020 to 3,088 in March 2020 during the COVID-19 pandemic. The area in grey on the chart marks the COVID -19 recession.
Donald Trump served a full term (48 months) as president and it’s important to note that the stock market bounced back post COVID-19 pandemic. It increased from a low of 3,088 in March 2020 to a high of 4,379.09. By the time Trump left office, it had still increased by 63%.
37 months into Biden’s administration has seen a stock market rally with the S&P 500 breaking through the 5,000 mark on 9th February 2024. It closed on 16th February 2024 at 5,005.57 USD. The growth is mainly being driven by tech. stocks like Microsoft, Apple, and Alphabet (Google).
Job Growth
Let’s look at the job growth for the first 36 months for each presidency.
| President | Number of jobs at start of Presidency | Number of Jobs after 36 months | Jobs Created |
| Joe Biden | Jan 2021 142,916,000 | Jan 2024 157,700,000 (provisional figure) | 14,784,000 |
| Donald Trump | Jan 2017 145,636,000 | Jan 2020 152,045,000 | 6,409,000 |
At first glance, the figures suggest that under Biden in his first 36 months versus Trump in his first 36 months and pre-pandemic, Biden’s administration created more than double the number of jobs than the Trump administration did.
However, you need to look at this in light of the COVID-19 pandemic. From March 2020 to April 2020, 20,477,000 jobs were lost. That was a 13.6% loss in jobs, in 2 months!
If the COVID-19 pandemic had not happened, nor shattered the US economy and if the number of jobs had even remained completely flat at 152,045,000 from January 2020 to January 2021, overall Biden would have created 5.7m jobs, less than the 6.4m jobs that Trump created in the same time span. However, this conclusion is achieved by extrapolation.
By the time Trump left office, there were 2.7m fewer jobs than when he became President, ” becoming the first president in modern times to experience a net loss of jobs over his time in office.” Source: Factcheck.org, ‘Trump’s Final Numbers‘.
There is no doubt that the COVID-19 pandemic in Trump’s final year in office adversely affected the overall performance of the economy under his Presidency.
Unemployment Rates
Donald Trump: When Donald Trump became US President in January 2017, the unemployment rate was 4.7%. By Economists’ standards that is full employment.
From January 2017 to February 2020, the unemployment rate dropped to 3.5%. This all changed when the COVID-19 pandemic broke world wide and triggered a recession.
During the COVID-19 pandemic, the country was in lockdown where more than 310 million Americans were told to stay at home.
Unemployment reached its highest during Trump’s presidency at 14.8% in April 2020. To put this into perspective, unemployment peaked at 10% during The Great Recession (2007-2009)
As vaccines were rolled out, people started returning to their jobs and the economy started to recover. The unemployment rate dropped to 6.4% by the time Trump left office.
Joe Biden: Biden took office in January 2021. In March 2021, he signed the American Rescue Plan Act of 2021 (a.k.a. the COVID-19 Stimulus Package), a USD 1.9 trillion economic stimulus bill, into law. This was to help the U.S. recover from the economic and health impacts of COVID-19.
It included:
- $1,400 stimulus payments to eligible individuals and families
- unemployment benefits to those who lost their jobs during the pandemic
- state and local government aid
- money towards helping schools reopen
- money assigned to COVID-19 research and vaccination rollout.
The unemployment rate has subsequently dropped from 6.4% to 3.7% as of January 2024. This is still higher than when Trump was in office just at the start of the pandemic when unemployment was at 3.5%.
Inflation
During Trump’s presidency, inflation hovered in and around the 2% mark. However, US inflation shot up during COVID-19.
An article by the US Bureau of Labor Statistics called ‘What caused inflation to spike after 2020?’ explained the causes of inflation per below.
“As the labor market tightened during 2021 and 2022, core inflation rose as the ratio of job vacancies to unemployment increased. This ratio is used to measure wage pressures that then pass through to the prices for goods and services. As workers bargain for better pay, firms begin to increase prices. So, from this research, the authors find that three main components explain the rise in inflation since 2020: volatility of energy prices, backlogs of work orders for goods and services caused by supply chain issues due to COVID-19, and price changes in the auto-related industries.”
This caused inflation to shoot up to 7% in 2021, falling slightly to 6.5% in 2022 with the latest figures showing 3.1% for 2024.
Wage Increases
Under Joe Biden, wages have increased but following the high inflationary period during COVID-19 wages did not keep up with inflation until February 2023 when inflation started to drop.
Since March 2023, wage growth has been 6.4% but this has consistently dropped since then to 5% as at January 2024.
Under Donald Trump, according to Factcheck.org “Paychecks grew faster than inflation. Average weekly earnings for all workers were up 8.7% after inflation.”
Conclusion
I have presented the data and statistics for the performance of the S&P 500 under current US President Joe Biden and former US President Donald Trump.
At month 37, which is where we are at for Joe Biden, the S&P 500 performed better at this point than at 37 months for Trump as this was February 2020, the start of the COVID-19 global pandemic that shattered stockmarkets and economies across the world.
The COVID-19 pandemic at the beginning of 2020, during Trump’s last year in office, derailed the US economy. The S&P 500 plunged, and millions of jobs were lost in the space of a couple of months resulting in unemployment shooting up to almost 15%.
However, despite this, the economy recovered and by the time Trump left office the S&P 500 had increased overall by 63%.
During Trump’s tenure, inflation was kept low, hovering around the 2% mark and wages grew by 8.7% after inflation. This contrasts with Joe Biden’s first couple of years in office when inflation shot up to 7% in 2021, dropped to 6.5% in 2022 and wage growth did not keep up.
On the face of it, Biden has created double the jobs that Trump created in the first 36 months in office. However, job creation consistently grew under Trump until February 2020 when the onset of the COVID-19 pandemic saw the loss of 20m US jobs in a matter of 2 months.
When Trump took office, unemployment was 4.7%. This dropped to 3.5% just before the COVID-19 pandemic started. As of January 2024, under Biden, US unemployment is 3.7%.
The S&P 500 is a bellwether for the US economy, and it performed consistently better under Trump than Biden for their first 36 months in office.
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DISCLAIMER: Inquisitive Finance operates on principles of exchange of knowledge, ideas and opinions and learning in the community. Your decisions are entirely your own responsibility, and I am in no way responsible for your actions. I am not a financial advisor. Whilst I strive to provide accurate and up-to-date information, I make no warranties or representations as to the accuracy or completeness of this information. Use common sense, do due diligence and where necessary, use the services of a licensed financial advisor, before making any financial decision and/or transaction.
