How Is That Reagan-Trump S&P500 Analog Working Out?

So far, at the close of 2016,  the Trump S&P500 is outperforming  the Reagan S&P500 by 0.38 percent, 38 days after the close of their respective election days.  The Trump bump has been a relatively steady climb before rolling over last week whereas a much more volatile S&P 40 days after the Reagan election.

Note also the Reagan bull market really didn’t begin until a year and a half into his Administration.  The S&P500 continued to slide after his inauguration as the economy was in the throes of a deep recession.   Monetary policy began to ease — see chart below where Fed Funds rate fell over 1,ooo bps from July 1981 to August 1982 * —  and the stock market finally bottomed toward the end of the recession in the fall of 1982.

The Reagan-Trump Analog is completely useless, in our opinion, as the relative  macroeconomic initial conditions at the advent of their two Presidencies are entirely different.   Nevertheless,  a fun tracking exercise and we do expect a little more give back in the S&P500 in the next month.  We don’t expect the almost 30 percent high-to-low give back in the first year and half of the new Administration.

President Trump will inherit and entirely different economy than President Reagan.   Stay tuned.

* Fed funds was not a target variable at the time, but does reflect monetary conditions.



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