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The Top 10 Presidents of All Time (At Least According to the Stock Market)

A more comprehensive version of this article covering all presidents back to 1889 was originally published on Kiplinger’s.

Mount Rushmore features massive 60-foot-tall busts of celebrated presidents George Washington, Thomas Jefferson, Abraham Lincoln and Theodore Roosevelt, each chosen for their respective roles in preserving or expanding the Republic.

But if you were to make a Mount Rushmore for presidents based on stock market performance, none of these men would make the cut. There really was no stock market to speak of during the administrations of Washington, Jefferson and Lincoln, and Teddy Roosevelt ranks as one of the worst-performing presidents of the past 130 years. In his nearly eight years in office, the Dow returned a measly 2.2% per year.

Just for grins, let’s see what a “stock market Mount Rushmore” might look like. And while we’re at it, we’ll rank every president that we can realistically include based on the available data.

Naturally, a few caveats are necessary here. The returns data you see here are price only (not including dividends), so this tends to favor more recent presidents. Over the past half century, dividends have become a smaller portion of total returns due to their unfavorable tax treatment.

Furthermore, the data isn’t adjusted for inflation. This will tend to reward presidents of inflationary times (Richard Nixon, Jimmy Carter, Gerald Ford, etc.) and punish presidents of disinflationary or deflationary times (Franklin Delano Roosevelt, George W. Bush, Barack Obama, etc.)

And finally, presidents from Hoover to the present are ranked using the S&P 500, whereas earlier presidents were ranked using the Dow Industrials due to data availability.

That said, the data should give us a “quick and dirty” estimate of what stock market returns were like in every presidential administration since Benjamin Harrison. (He ranks near the bottom, by the way, with losses of 1.4% per year).

PresidentFirst Day in OfficeLast Day in OfficeStarting S&P 500*Ending S&P 500*Cumulative ReturnDaysCAGR
* Dow Industrials used prior to President Herbert Hoover
^ Data though 7/2/2018
Calvin CoolidgeAugust 3, 1923March 3, 192987.20319.12265.96%203926.14%
Bill ClintonJanuary 20, 1993January 19, 2001433.371342.54209.79%292115.18%
Barack ObamaJanuary 20, 2009January 19, 2017805.222263.69181.13%292113.79%
Donald Trump^January 20, 2017July 2, 20182271.312703.8919.05%52812.81%
William McKinleyMarch 4, 1897September 13, 190130.2849.2762.68%166511.26%
George H.W. BushJanuary 20, 1989January 19, 1993286.63435.1351.81%146011.00%
Dwight EisenhowerJanuary 20, 1953January 19, 196126.1459.77128.65%292110.89%
Gerald FordAugust 9, 1974January 19, 197780.86103.8528.43%89410.76%
Ronald ReaganJanuary 20, 1981January 19, 1989131.65286.91117.93%292110.22%
Harry TrumanApril 12, 1945January 19, 195314.2026.0183.17%28398.09%
Lyndon JohnsonNovember 22, 1963January 19, 196969.61102.0346.57%18857.68%
Warren HardingMarch 4, 1921August 2, 192375.1188.2017.43%8816.88%
Jimmy CarterJanuary 20, 1977January 19, 1981102.97134.3730.49%14606.88%
John KennedyJanuary 20, 1961November 21, 196359.9671.6219.45%10356.47%
Franklin RooseveltMarch 4, 1933April 12, 19456.8114.05106.31%44226.16%
Woodrow WilsonMarch 4, 1913March 3, 192159.1375.2327.24%29213.06%
Theodore RooseveltSeptember 14, 1901March 3, 190951.2960.5017.95%27272.23%
William Howard TaftMarch 4, 1909March 3, 191359.9259.58-0.56%1460-0.14%
Benjamin HarrisonMarch 4, 1889March 3, 189340.0737.82-5.61%1460-1.43%
Richard NixonJanuary 20, 1969August 8, 1974101.6981.57-19.78%2026-3.89%
Grover ClevelandMarch 4, 1893March 3, 189737.7530.86-18.25%1460-4.91%
George W. BushJanuary 20, 2001January 19, 20091342.90850.12-36.702921-5.55%
Herbert HooverMarch 4, 1929March 3, 193325.495.84-77.08%1460-30.82%

At the very top of the list is Calvin Coolidge, the man who presided over the boom years of the Roaring Twenties. Coolidge, a hero among small-government conservatives for his modest, hands-off approach to government, famously said “After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world.”

It was true then, and it’s just as true today.

In Coolidge’s five and a half years in office, the Dow soared an incredible 266%, translating to compound annualized gains of 26.1% per year.

Of course, the cynic might point out that Coolidge was also extraordinarily lucky to have taken office just as the 1920s were starting to roar… and to have retired just as the whole thing was starting to fall apart. His successor Hoover was left to deal with the consequences of the 1929 crash and the Great Depression that followed.

The second head on Rushmore would be that of Bill Clinton. Clinton, like Coolidge, presided over one of the largest booms in American history, the 1990s “dot com” boom. And Clinton, particularly during the final six years of his presidency, was considered one of the more business-friendly presidents by modern standards.

The S&P 500 soared 210% over Clinton’s eight years, working out to annualized returns of 15.2%.

Not far behind Clinton is Barack Obama, who can boast cumulative returns of 181.1% and annualized returns of 13.8%. President Obama had the good fortune of taking office right as the worst bear market since the Great Depression was nearing its end. That’s fantastic timing. All the same, 181% cumulative returns aren’t too shabby.

Interestingly, the infamous “Trump rally” places Donald Trump as the fourth head on Mount Rushmore with annualized returns thus far of 12.8% It’s still early, of course, as President Trump is not even two years into his presidency. And given the already lofty valuations in place when he took office, it’s questionable whether the market can continue to generate these kinds of returns throughout his presidency. But he’s certainly off to a strong start.

After Trump, the next four presidents – William McKinley, George H.W Bush, Dwight Eisenhower and Gerald Ford – are clumped into a tight band, each enjoying market returns of between 10.8% and 11.3%. And the top 10 is rounded out by Ronald Reagan and Harry Truman, with annualized returns of 10.2% and 8.1%, respectively.

We’ve covered the winners. Now let’s look at the losers; the “Mount Rushmore of Stock Market Shame,” if you will.

Herbert Hoover occupies the bottom rung with a truly abysmal 77.1% cumulative loss and 30.8% annualized compound loss. In case you need a history refresher, Hoover took office just months before the 1929 crash that ushered in the worst bear market in U.S. history.

Don’t feel too sorry for Hoover, however. 1,028 economists signed a letter warning him not to sign the Smoot Hawley Tariffs into law… yet he did it anyway. This helped to turn what might have been a garden variety recession into the Great Depression. That’s on you, Hoover.

In second place is George W. Bush, with annualized losses of 5.6%. Poor W had the misfortune of taking office just as the dot com boom of the 1990s went bust and shortly before the September 11, 2001 terror attacks helped to push the economy deeper into recession. And if that weren’t bad enough, the 2008 mortgage and banking crisis happened at the tail end of his presidency.

Sandwiched between two of the worst bear markets in U.S. history, poor W never had a chance.

Rounding out the Mount Rushmore of Stock Market Shame are Grover Cleveland and Richard Nixon with annualized losses of 4.9% and 3.9%, respectively.

Nixon’s presidency was marred by scandal and by the devaluation of the dollar, neither of which was good for market returns.

Poor Cleveland, on the other hand, was just unlucky. By any historical account, he was a responsible president who ran an honest and fiscally sound administration. But then the Panic of 1893 hit the banking system and led to a deep depression. The fallout was so bad that it actually led to a grassroots revolt and to a total realignment of the Democratic Party. After Cleveland fell from grace, the mantle of leadership shifted to Progressives Woodrow Wilson and William Jennings Bryan, and the rest is history.

To see the full rankings of all presidents since 1889, see The Best and Worst Presidents (According to the Stock Market)

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Take Your Losses Early and Often

With market volatility picking up this past week, now is as good a time as any to review why it’s important to take your losses early.

Portfolio LossGain Required to Break Even
(10%)11%
(20%)25%
(30%)43%
(40%)67%
(50%)100%
(60%)150%
(70%)233%
(80%)400%
(90%)900%
(97%)3,233%

If you lose 10%-20% in a trade, it’s not that hard to recover. It only takes 11% – 25% to get back to where you started.

But if you lose 50%, you need 100% returns to get back to break even. Or if you lose 97% — as Bill Ackman recently did in Valeant Pharmaceuticals — you’d need a ridiculous 3,233% on your next trade just to get back to zero.

I have a select few stocks in my portfolio that I’m truly willing to buy and hold, tolerating whatever volatility the market throws at me. As an example, I own some shares of Realty Income (O) that I will never sell. I’m reinvesting the dividends and letting them compound, and I’m willing to sit through a significant drawdown.

But for the lion’s share of my portfolio, I take my losses early. I’ve taken enough losses over the years to learn that lesson the hard way…

 

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Why I Built a Liquid Alternative Robo Advisor

liquid alternative robo advisorMost financial advisors and money managers are terrified of robo advisors. And frankly, if your job description consists of selling expensive mutual funds for a commission, you should be worried. Your business model has been slowly dying for decades, and low-cost robos are the final nail in the coffin.

Technology and competitive capitalism are doing to the financial services industry what they have already done to countless industries before. They’re cutting out the middle men and passing the savings on to the ultimate consumer. That’s a good thing. A very good thing, because every dollar saved in fees is a dollar that remains in your clients’ account to compound and grow over time.

Upstarts like Betterment and Wealthfront (as well as old hands like Vanguard) can build decent traditional stock and bond portfolios that perform every bit as well as the average man-made portfolio. But where they have been less effective is in the alternative space. And this matters — a lot.

As I wrote recently for Forbes, the traditional 60/40 portfolio is dead, and it’s not coming back any time soon. With both stock and bond prices extremely elevated, returns are almost guaranteed to disappoint over the next decade. Bonds, in particular, have gone from offering a “risk-free return” to offering a “return-free risk.” So, investors wanting to earn a respectable return will be increasingly pushed into alternative investments, such as hedge funds (see In Defense of Hedge Funds…).

But the problem with hedge funds is that they are only available to the wealthy, and they tend to have high minimum investments and high fees, along with limited liquidity and transparency. While hedge funds can make all the sense in the world in the right portfolio — and I use them extensively with my accredited investor clients — they obviously won’t work for every investor.

And this is precisely why I created a liquid alternative robo advisor. I wanted my clients to have access to some of the same strategies used by multi-billion-dollar hedge funds. But I wanted to make them available to all investors rather than just the wealthy ones. And I wanted to do it at a reasonable price with full transparency.

Our liquid alternative robo advisor takes clients through a risk questionnaire, much like the more mainstream robo advisors. But rather than dump them into a generic stock/bond portfolio, it assigns them to a volatility-targeted risk parity portfolio. (For a longer explanation of the strategy itself, see our presentation.)

Our fees, at 0.80%, are a little higher than those of Wealthfront or Betterment. But remember, we’re not competing with these traditional robos. We’re competing with hedge funds and other alternative managers,  which generally charge 2% of assets and 20% of profits.  And our solution is held in separately managed account at a reputable third-party custodian.

Creating the liquid alternative robo advisor allows me to serve clients I’d otherwise never be able to serve. The biggest impediment to an advisor growing their practice is time. Your instinct is to try and serve every client that knocks on your door. But the reality is, you can’t. There aren’t enough hours in the work day to do sit-down meetings with clients that have only modest sums to invest. Time has a monetary value, and unfortunately, you actually lose money on smaller clients. And you have the same amount of regulatory compliance responsibilities with a $10,000 client as a $10,000,000 client. Arguably, you actually have more.

But a robo setup changes that. With a robo setup, you can still profitably serve smaller clients, get them the same portfolios you would give a high roller, and all the while keep the regulators happy. A robo setup also allows a larger client to “kick the tires” and try out your services before committing a larger portion of their net worth to your management.

The financial advisory business is changing — quickly. With the rise of the robos, there will be a lot of attrition, and a lot of marginal advisors will end up folding their practices. If you want to survive and thrive in this line of work, you need to bring something new to the table. My advice is embrace the robo and build one that leverages what you do best.

Charles Lewis Sizemore, CFA is the principal of Sizemore Capital, an investments firm in Dallas, Texas.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Looking Beyond the 60/40 Portfolio in an Era of Low Returns

I wrote earlier this year that the 60/40 portfolio is dead. Well, rumors of its death were not greatly exaggerated. The 60/40 portfolio that served retired investors so well over the past 30 years is gone… and it’s not coming back any time soon. As investors, we have to move on.

Rest in Peace 60/40 Portfolio

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While it’s true that a simple 60/40 portfolio of the SPDR S&P 500 ETF (SPY) and the iShares Core US Aggregate Bond ETF (AGG) is actually enjoying a nice run in 2016, up a little more than 3% for the year, don’t get used to it. The math simply doesn’t work out going forward.

Let’s play with the numbers. Back in 1980, the 10-year Treasury yielded a fat 11.1%, and stocks sported an earnings yield (calculated as earnings / price, or the P/E ratio turned upside down) of 13.5%. This implied a back-of-the-envelope portfolio return of about 12.5% per year going forward, and for much of the 1980s and 1990s that proved to be a conservative estimate. Both stocks and bonds were priced to deliver stellar returns, and both most certainly did.

But what about today? The 10-year Treasury yields a pathetic 1.6% and the S&P 500 trades at an earnings yield of just 4%. That gives you a blended portfolio expected return of an almost embarrassing 2.8%. [Note: The usual disclaimers apply here. These are not intended to be precise market forecasts.]

You know the refrain: past performance is no guarantee of future results. There is no guarantee, at least with respect to stocks, that expensive assets can’t get even more expensive. It’s possible that the great bull run in stocks could continue indefinitely, however unlikely it might be.

But I can’t say the same for bonds. Starting at a 1.6% yield to maturity (or even the 4% you might find on a mid-grade corporate bond) you cannot have returns going forward that are anything close to the returns of the past several decades. Bond yields would have to go negative, and I don’t mean the (0.15%) we see today on the Japanese 10-year bond. I’m talking (5%) or (10%) or even more.

That’s not going to happen. Or if somehow it did — if investors got so petrified that they piled into bonds to the extent that yields went negative to that degree — then I would assume the stock portion of your portfolio effectively fell to zero at that point.

The bottom line here is that even under the most optimistic scenario, investors are looking at disappointing returns in a standard 60/40 portfolio.

So, what are investors supposed to do about it? They can’t just stuff their cash in a mattress for the next 5-10 years. Most of us actually need to earn a return on our money.

I’d offer the following suggestions:

Consider taking a more active approach to investing.

To the extent you invest in traditional stocks and bonds, don’t be a buy and hold index investor. Yes, low fees are great. But the fact that you paid Vanguard only 0.09% per year in management fees won’t really matter if you’re returns are still close to zero.

Instead, try a more active strategy, perhaps focusing on value or momentum. Or perhaps try a dividend focused strategy. With a dividend strategy, you can realize a cash return even if the market goes nowhere for years at a time.

Consider investing outside of the market.

If you’re willing to get your hands dirty, consider starting your own business or investing in a cash flowing rental property. Yes, there is more work involved, and there is the risk of failure. But there is also risk in trusting your savings to a fickle market when both stocks and bonds are both expensive by historical standards.

Consider a truly alternative asset allocation.

This final point is really my specialty. To the extent I can, I am eliminating traditional bonds from the portfolios of most of my clients and replacing them with non-correlated (or at least minimally-correlated) alternative investments. A standard 60/40 stock / bond portfolio might instead become a 50/50 dividend stocks / alternative investments portfolio.

“Alternative investments” is a generic term that can mean just about anything. In practice, for me it has meant a combination of long/short strategies, options writing strategies, absolute return hedge funds, and liquid alternative portfolios. I’ve even incorporated a liquid alternative robo advisor into the mix.

Will a non-traditional portfolio like this outperform over time?

Frankly, I don’t know. No one does. We’ve never seen a market like today’s.

But to me, it’s the only move that makes sense. Taking the traditional path is a virtual guarantee of disappointment. Incorporating alternatives into the portfolio at least give us the potential for solid returns.

Charles Lewis Sizemore, CFA is the principal of Sizemore Capital, an investments firm in Dallas, Texas.

Photo credit: Pheonix149

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Why Dividends Matter

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Photo credit: www.SeniorLiving.Org

I like getting paid in cold, hard cash. And frankly, who doesn’t?

But stock dividends are more than just a quarterly paycheck. They are a way of doing things. I would go so far as to argue that they are a philosophy of life (or at least of business).

That might sound a little kooky at first, but hear me out.

In the Wolf of Wall Street, Jordan Belfort (or at least Leonardo DiCaprio playing Belfort) says that money does more than just buy you a better life; it also makes you a better person. That’s certainly debatable. But I can credibly say that paying a dividend makes for a better kind of company. And here are a few reasons why:

  1. Dividends are an outward, visible sign of who the real boss is. Remember, the SEO in the suit running the company isn’t the owner. He’s an employee, no different than a common assembly line worker other than for his larger paycheck. You, the shareholder, own the company. And management shows that they understand and respect that by regularly paying and raising the quarterly dividend.
  2. Dividends dissuade fruitless empire building. Corporate CEOs really aren’t that different from politicians. At the end of the day, they spend other people’s money and often times waste it on useless projects or on mergers that add no value. Why? Because growth – even unprofitable growth – gives them more power and control. Well, paying a regular dividend forces management to be more disciplined. If you’re paying out half your profits as a dividend, you have to be more selective about the growth projects you choose to pursue with your remaining cash. They focus on the most profitable and worthwhile and, by necessity, pass on the marginal ones.
  3. Dividends foster more honest financial reporting. At one point or another, many (if not most) companies will… ahem… perhaps be a little less than honest in their financial reporting. Outright fraud is pretty rare. But accounting provisions allow for a decent bit of wiggle room in how revenues and profits are reported. Even professionals can have a hard time figuring out what a company’s true financial position is if the numbers are fuzzy enough. Well, while revenues and profits can be obfuscated by dodgy accounting, it’s hard to fudge the numbers when it comes to cold, hard cash. For a company to pay a dividend, it has to have the cash in the bank. So while paying a good dividend is no guarantee that the company isn’t being a little aggressive with its accounting, it definitely acts as an additional check.
  4. Share buybacks – the main alternative to cash dividends – never quite seem to work out as planned. Companies inevitably do their largest share repurchases when times are good, they are flush with cash, and their stock is sitting near new highs. But when the economy hits a rough patch, sales slow, and the stock price falls, the buybacks dry up. And another (and frankly insidious) motivation for buybacks is to “mop up” share dilution from executive stock options and employee stock purchase plans. The net effect is that a company buys their shares high and sells them back to employees and insiders low. Call me crazy, but I thought the whole idea of investing was to buy low and sell high, not the other way around. A better and more consistent use of cash would be the payment of a cash dividend.
  5. And finally, we get to stock returns. I’m not particularly excited about the prospects for the stock market at today’s prices. Based on the cyclically adjusted price/earnings ratio, the S&P 500 is priced to deliver annual returns of virtually zero over the next decade. But if you’re getting a dividend check every quarter, you’re still able to realize a respectable return, even if the market goes nowhere. And that return is real, in cold hard cash, and not ephemeral like paper capital gains.

Hey, not every great company pays a dividend. And certainly, a younger company that is struggling to raise capital to grow has no business paying out its precious cash as a dividend when it might need it to keep the lights on next month. But for the bulk of your stock portfolio – the core positions that really make up your nest egg – look for companies that have a long history of paying and raising their dividends.

Charles Lewis Sizemore, CFA is the principal of Sizemore Capital, an investments firm in Dallas, Texas.

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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