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The Link Between The State of The US Economy And Its Presidents

It is official. Republican Donald Trump has been elected as the new President of the United States.

Even before the results were announced, I was curious to find out what has happened to the US economy under different presidents.

To satisfy my curiosity, I found a July 2014 Princeton University study that tracked the post-war economic performance of the United States starting from Democrat President Harry Truman’s administration in 1945.

The study, conducted by Professors Alan Blinder and Mark Watson, found that the US stock market’s performance in the transition months appear to reflect investors’ confidence in the new incoming president.

US Presidents and the economy

The study also found that Democrats are likely to take office when the economy is taking off, while Republicans are likely to do so when the economy is slow.

The study recounted the economic picture of the US under three previous presidents too.

Democrat President Bill Clinton oversaw a booming economy from 1993 to 2001 in which the US experienced productivity growth and higher investments and stock prices. A technology boom and low interest rates had helped as well.

Republican President George Bush took over in the aftermath of the bursting of the tech bubble in 2000 and oversaw a weak recovery from 2002 to 2007. Toward the end of his presidency, there was also the infamous housing crisis which morphed into the global financial crisis when the US investment bank Lehman Brothers collapsed in 2008.

Finally, Democrat President Barack Obama took office in 2009 and oversaw the recovery of the economy. The stock market bottomed out in March 2009 from the financial crisis and the bottoming had predicted the economic recovery in June the same year.

Overall, what the Princeton University study show is that the US economy had historically grown faster by 1.8 percentage points per year under Democratic presidents as compared to Republican presidents. The study added:

“It implies that over a typical four-year presidency the U.S. economy grew by 18.6% when the president was a Democrat, but only by 10.6% when he was a Republican.”

As a reminder, Trump is a Republican.

Implications for Singapore

The economic growth of the US is important to Singapore because the US was the second largest service export market for Singapore in 2014 according to the Department of Statistics. If the United States are to grow at a slower pace in the future – or if trade barriers are erected – it could affect Singapore’s ability to export services to the US.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ong Kai Kiat does not own shares in any companies mentioned.