November 11, 2013
Even with the flawed roll out of health-care reform and uproar over spying, Barack Obama is enjoying one of the best stock markets for a re-elected president. Signs are building that it might not last.
This year’s 24 percent jump in the Standard & Poor’s 500 Index is the third-biggest annual rally after a president was returned to office since the 1930s, trailing Bill Clinton and Ronald Reagan, according to data compiled by Bloomberg. The index has climbed 108 percent since Obama became president, adding more than $10 trillion in equity market value.
Record Federal Reserve stimulus, interest rates around zero percent and a doubling of corporate profits since they fell to a five-year low in 2008 helped sustain stock increases under Obama. The rally that began just after he took office now exceeds the average length of bull markets by almost a year and valuations are up 18 percent in 2013. Add to that prospects for the Fed to curtail stimulus, threatening higher borrowing costs, and the outlook for further gains under Obama is grimmer.
“The president came in at a highly unusual time with markets in complete disarray,” Chad Morganlander, a Florham Park, New Jersey-based portfolio manager at Stifel Nicolaus & Co., which oversees about $130 billion, said by phone Nov. 6. “After the rally this year, we’re fairly valued at best. The next stage of this will have to be an improving economic outlook and earnings outlook well above where we stand.”