The stock market is set to close out President Biden’s first 100 days in office on Thursday with its best start to a presidential term since the days of Franklin D. Roosevelt.
The S&P 500 has risen 10% since Mr. Biden’s Jan. 20 inauguration. The index is on course for its strongest performance since the start of Mr. Roosevelt’s first term in 1933, when it surged 80% after a spectacular crash in the Great Depression, according to a Dow Jones Market Data analysis. By comparison, the S&P 500 rose 5.3% in the first 100 days of President
term in early 2017 and on average has gained 3.2% over that period in presidential terms since
Investors say it is no surprise that bountiful government spending, increasing Covid-19 vaccinations, growing faith in the economic reopening and continued support from the Federal Reserve have powered the latest leg up in the stock market.
Many, though, say it is a mistake for stockholders to focus too much on political questions like which party occupies the White House because corporate earnings and economic growth have a much greater influence on the market. And the S&P 500’s record over the early months of a term doesn’t necessarily indicate the president is business-friendly.
“We do have an economy that’s opening back up, with a super strong consumer, with people getting vaccinated, so it’s a big positive,” said
chief market strategist at Crossmark Global Investments, which manages about $5.5 billion. “Looking since the middle of January, I don’t think anyone can say that there’s a specific reason as to why the market should not have done this.”
The U.S. has made strides in its vaccination campaign, with the Biden administration reaching its goal of giving 200 million doses within the president’s first 100 days. Vaccines appear to be starting to slow the spread of new Covid-19 infections in the U.S., bolstering expectations that the economy can move beyond the restrictions that have slowed activity during the pandemic. At the same time, the pace of vaccinations has recently slowed from earlier in the month.
Investors have responded by snapping up shares of companies in the travel industry and bidding down stocks that benefited from last year’s rapid shift to working from home.
shares have jumped 38% from the close of trading on Jan. 19, while
shares have climbed 33%. Shares of
by contrast, have sagged 16%, and shares of
Peloton Interactive Inc.
have slumped 31%.
Consumer confidence in the U.S., meanwhile, has risen for four consecutive months. Recent readings may have been boosted by the distribution of checks to households, following Mr. Biden’s signing in March of a $1.9 trillion coronavirus relief bill that provided for direct payments to many Americans.
There could be more fiscal stimulus to come: In late March, Mr. Biden unveiled a $2.3 trillion infrastructure plan that could benefit businesses ranging from trucking companies and semiconductor manufacturers to electric-vehicle makers. Shares of heavy-machines maker
have risen 20% and shares of graphics-chip giant
have gained 17% during the Biden presidency.
And the president on Wednesday promoted a $1.8 trillion proposal for new spending on child care, education and paid leave—a plan he would largely pay for by raising taxes on the wealthiest Americans.
Republicans have criticized the plan, saying Mr. Biden has called for too much federal spending, and have objected to the tax hikes. Democrats’ slim majority in the House and tenuous control over the Senate—which is evenly split but subject to tiebreaking votes by Vice President
—add to the uncertainty that often faces major policy proposals.
Money managers also expect continued support from the Federal Reserve, which on Wednesday kept its key interest rate near zero while saying the central bank plans to continue supporting the economic recovery.
All this has raised expectations for companies and sent shares leaping. The S&P 500 recently set its 24th record close of the year, while the tech-heavy Nasdaq Composite set its first new high since February. Rising government-bond yields, which reflect the optimism about economic growth, had dented the appeal of technology shares relative to other parts of the market, but lately those stocks have been rallying, too.
“Sometimes people start worrying because the market has come a long way,” said Jerry Braakman, chief investment officer at First American Trust. “But with all this government spending, fiscal and monetary stimulus, an improving economy with pent-up demand, those kind of worries ebb pretty quickly.”
Bullish investors point to the current earnings season during which corporations have been trouncing analysts’ expectations. With about 40% of companies in the S&P 500 having reported results, profits are projected to have grown 42% in the first quarter from a year earlier, according to FactSet. At the end of December, analysts had forecast a rise of 16%.
Still, the recent rally has kept stock valuations elevated. The S&P 500 traded Tuesday at 22.46 times its projected earnings over the next 12 months, above the five-year average of 18.20. The lofty valuations have fueled concern that stocks may be in a bubble, a worry that has extended beyond equities, as everything from lumber to bitcoin reaches new highs.
Investors are watching for anything that could derail the rally, and some are casting a wary eye on Mr. Biden’s calls to raise taxes on corporations and high earners. An increase in corporate taxes could take a bite out of earnings, while higher capital-gains taxes could prompt some stockholders to sell.
Signals of how negotiations are playing out in Washington could help set the tone for the next 100 days of the stock market’s performance.
“Biden bucks are great in the short term,” said David Bianco, chief investment officer for the Americas at asset manager DWS Group. “’How do you pay for it?’ is an investor concern for the longer term and a concern that people are just beginning to turn their attention to.”
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