Barack Obama is about to begin the third year of his presidency.  For just this once, let's ignore his philosophy of governance and the specific programs that have been passed in his first two years.  Let's also not speculate on what policies and programs he's likely to champion over the next two years.  Instead, let's look at history.

The most complete study ever done on the history of the U.S. stock market was (and is) the ongoing work of Professor Jeremy Siegel of the University of Pennsylvania's Wharton School.  Many of his findings were published in the now classic Stocks for the Long Run: The Definitive Guide to Financial Market Returns and Long Term Investment Strategies* in 1994.  As I write, I'm looking at the Fourth Edition, published in 2008, before the recent financial unpleasantness.

From 1888 through 2006, there were thirty presidential terms, and twenty men have occupied the White House Oval Office. In general the third year of presidential terms has been kind to stock market investors. Using the S&P 500 Total Return Index, Professor Siegel tells us that of the thirty third year periods, only four have been negative:

• William McKinley's 2^nd term                  minus  17.4%
• Theodore Roosevelt                               minus  24.5%
• Herbert Hoover                                        minus  43.3%
• Franklin Roosevelt's 2^nd term                minus    0.4%

Since President Obama will serve a fourth year in 2012, let's look at the history of fourth year returns. Again, of the thirty fourth year periods, only four were negative:

• Woodrow Wilson's 2^nd term                  minus   14.3%
• Herbert Hoover                                       minus     8.2%
• Franklin Roosevelt's 3^rd term                minus     9.8%
• Bill Clinton's 2^nd term                             minus    9.1%

If you'll remember, please, that none of these statistics predict the future, I'll give you these final numbers as a palliative for any fear of depredation that you may be feeling about the market:

First, the annualized return of the market from 1888 (Benjamin Harrison) to 2006 (George W. Bush) was 9.58%. Second, and more importantly, adjusting for inflation (average = 2.69%), the annualized return of the market for the same period was 6.71%.

Finally, if you insist on knowing (and I know you will):

From 1888 through 2006, the average inflation adjusted return of the market under democratic presidents has been 6.49%; and under republican presidents, 6.91%.Until next week,

PATIENCE, DISICPLINE, and CONFIDENCE in the FUTURE! mh

*   Stocks for the Long Run: The Definitive Guide to Financial Market Returns and Long Term Investment Strategies, by Jeremy J. Siegel, McGraw Hill, 2008, pp. 229, 230.