5 Reasons Investors Should Love Obama

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Wall Street abounds with ‘Obamanomics’ critics, and Main Street made clear its discontent with the president’s policies in the results of the midterm elections last November.

But detractors of President Obama should remember one thing – Wall Street has been booming under this president. Since Obama took office on Jan. 20, 2009, the Dow is up about 48%, the S&P 500 is up 60% and the tech-focused Nasdaq is up 90%.

Of course, there was plenty of room for improvement after the market meltdown before Obama took office. The broader stock market is only now struggling back to levels seen in the summer of 2008.

Is it just a trick of timing, with America buying into Barack Obama at the bottom? Or has the president actually helped investors and the economy without getting enough credit?

Let’s take a look at the numbers across five crucial sectors touched by the president’s policies and see for ourselves:

Obama: Good for Financials

Some folks may not remember the Troubled Asset Relief Program was actually signed into law a month before Election Day in 2008. Obama and his economic team have held watch over the financial sector and TARP over the past two years, but in many respects were playing with a hand they were dealt by the previous administration.

So how has the group done? From a shareholder perspective, they have done well by the financial sector. Bank of America’s (NYSE: BAC) stock has doubled since 1/20/09, as has Goldman Sachs (NYSE: GS). Wells Fargo (NYSE: WFC) is up even more, 138%, and JPMorgan Chase (NYSE: JPM) is up 150%. Citigroup lags these names, but its 83% gains almost double the returns for the Dow Jones – an index it was removed from amid the financial crisis.

It’s worth noting, however, that some attribute recent strength in the sector to the blunting of the president’s power, as Republicans have taken control of the House. But regardless of intentions or politics, the fact is that bank stocks have had a market-beating run for the last two years – and after a rally in the sector to close 2010, it appears financials are looking to build on that momentum in 2011.

Obama: Mixed on Health Care

Health care is perhaps the only industry that “missed” the Great Recession. Though economic troubles in 2008 and 2009 slowed growth in healthcare spending, the industry did continue to grow overall and become an even larger part of the American economic engine.

But as Obama pushed through his landmark health care reform bill, many fretted the move would monkey with a free-market health care system that has seen big growth lately. That, and add crippling debt to an already fragile U.S. balance sheet.

What’s the score with healthcare? Big pharma has really been hurting – but that’s more the fault of expiring patents and generic competition than President Obama. Pfizer (NYSE: PFE), Merck (NYSE: MRK) and other large-cap drug companies finished 2010 worse than they started and showed anemic growth in 2009. On the other side of the coin, the boom of some small-cap biotechs like Alexion (NASDAQ: ALXN) is driven by innovative treatments or FDA approvals rather than the guiding hand of the administration.

As for insurers UnitedHealth (NYSE: UNH) and WellPoint (NYSE: WLP), both have seen market-beating returns north of 71% since Obama took office and were on the front lines of his landmark health care reform. Still it’s not a clear stamp of approval, since other major insurers Aetna (NYSE: AET) and Aflac (NYSE: AFL) have both underperformed the market slightly since 2009.

The takeway? Just like Obama’s health care policies overall, we’ll need some more time to figure things out. It’s a mixed bag right now for health care stocks, and success or failure seems to depend more on the company itself than politics. But at the very least, it appears Obama’s health reforms took the Hippocratic Oath to heart by first doing no harm to the state of healthcare stocks.

Keep reading to learn about Obama’s influence on the mining, oil and housing sectors…

Obama: Great for Gold and Metals

No surprise here for you goldbugs, but the last two years have been quite good for precious metals. The Federal Reserve’s policy of easy money and big U.S. debt are weighing on the dollar, and the prospect of commodity inflation is rearing its ugly head. Coupled with investor appetite for hard assets and the budding stages of economic recovery boosting demand for industrial metals like copper and steel, it’s likely we haven’t seen the end of the rally in metals and mining.

At home, aluminum giant Alcoa (NYSE: AA) has nearly doubled since Obama’s term began, and US Steel (NYSE: X) is up 85%. Among foreign heavyweights in the commodity space, Southern Copper (NYSE: SCCO) is up 240%, and Brazil steel giant Companhia Siderurgica (NYSE: SID) is up 180%.

And let’s not forget that gold as an investment itself is up about 60% since Obama took office, and silver is up almost 150%. Of course, whether or not your typical gold investor is a card-carrying Democrat or happy with the direction of the country is a separate conversation. From an investing point of view, these folks should be happy with the performance of their gold investments.

Obama: Good for Big Oil

With gas prices creeping up on $4 a gallon again, it’s no surprise that big oil has enjoyed a nice run since Obama took office.

Strangely enough, the only laggard truly sitting out the party is Exxon Mobil (XOM) – tallying a less than 10% gain since Jan. 20, 2009. Conoco (NYSE: COP), Hess (NYSE: HES), and Marathon Oil (NYSE: MRO) are all up over 60%, and oil service stocks Schlumberger (NYSE: SLB) and Halliburton (NYSE: HAL) have both seen gains of nearly 150%.

And despite fears of off-shore drilling becoming off-limits in the wake of the Deepwater Horizon spill in the Gulf, it appears the administration is softening language on the issue. But again, that probably has a lot to do with a change of leadership in the House and a need for a bipartisan bargaining chip.

Obama: Good for Housing Stocks

Depending on your local real estate market, you may think that housing is still in a free fall. But judging by housing-related investments, it’s been a very good two years under Obama.

While there are some ramshackle stocks in the sector — like PulteGroup (NYSE: PHM) that may never turn a profit again if the past several quarters are any indication — the broader swath of equities related to the housing market have rallied nicely. Take the diversified SPDR S&P Homebuilders ETF (NYSE: XHB), up about 75% since the beginning of Obama’s term. Or big builders Lennar (NYSE: LEN), up 130%, and DR Horton (NYSE: DHI), up over 210% in the same period. Then there are suppliers like Home Depot (NYSE: HD), up 75% or USG Corp. (NYSE: USG), which has doubled since Obama took office.

Many homeowners may be hurting and the Obama loan workout program has been largely unused by underwater homeowners and banks, but housing-related stocks certainly aren’t struggling.

Can Obama Claim Credit for the Boom?

In short, probably not. But it’s hard to argue that he hasn’t had a hand in Wall Street’s recovery. While some of the gains are indeed a trick of timing — Obama took up residence the White House less than two months before the market’s lowest point during the Great Recession — the president has managed to keep these five key sectors humming along even amid major policy changes. That indicates that he has done a decent job of balancing his agenda with a need to get the economy back on track, or at least not gumming up the works.

Detractors will contend that we should consider ourselves lucky Obama didn’t accomplish as much as he intended – a single-payer health care system, for instance, or the prospect of a “Volker rule” that would kill prop trading altogether. These actions could have upset the market and prevented any of the aforementioned gains. What’s more, perhaps the biggest reason for strength in the market lately has been the Republican seizure of power in the House just a few months ago.

But whether you think the market has been booming in spite of Obama’s leadership or because of it, the numbers show it has been a very good two years for investors of all stripes. Whether the next two years are as kind to Wall Street is a different story – and could have a lot to say about whether the president is granted a second term.

Jeff Reeves is editor of InvestorPlace.com . Follow him on Twitter . As of this writing, he did not own a position in any of the stocks or named here. Returns were calculated as of 1/19/11.


Article printed from InvestorPlace Media, https://investorplace.com/2011/01/president-barack-obama-good-for-stock-market/.

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