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Published: Tuesday, 7/15/2008

Bush financial legacy may hinge on Dow finish

In recent mid-day trading, the Dow Jones industrial average fell below 11,000 for the first time in a couple of years. And both the Dow and the Standard & Poor's 500-stock average remain mired in bear territory - meaning they have dropped more than 20 percent from their peaks.

Investors are concerned about where stocks are heading in the next six to 12 months. Will they wander deeper into bear country or change direction and head back toward a bull market?

It's reasonable to suppose some in the Bush administration are concerned, too. There is that "legacy" situation. With only six months left in George W. Bush's eight-year White House tenure, the Dow is just 4 percent above where it was when he took office, and the S&P 500 is down 9 percent.

This would not look good for his legacy if it keeps up.

Since the Dow Jones index first appeared in the Wall Street Journal in May, 1896, 20 presidents have occupied the White House. The Dow dropped during the tenure of only four presidents - Herbert Hoover, Richard Nixon, William Howard Taft, and Woodrow Wilson.

The average Dow gain during terms of the previous 19 presidents was 59 percent. Since the S&P 500 index began in March, 1957, nine presidents have seen that barometer rise an average of 57 percent during their terms.

Mr. Bush certainly can't be blamed for all of the stock market's ills. In fact, there may simply be a lot of unfortunate events holding the market back.

However, Mr. Bush and his administration have to take at least some of the blame for the slumping dollar and Mideast turmoil - both of which contribute to the high price of crude oil. It's not clear whether the administration could have done anything to mitigate the housing and banking crises (but one has to wonder where regulatory agencies were when the subprime mess got out of control).

And perhaps there are still some things the administration can do to help turn the markets around, even in the short timeframe of six months.

In the last century, five presidents have served two full terms. Only one saw the Dow decline: After World War I, the Dow fell, dropping a total of 8 percent during Woodrow Wilson's terms from 1913-1921.

The Dow did very well while the other two-termers were in office - up 225 percent for Bill Clinton (1993-2001), 194 percent for Franklin D. Roosevelt (total of 12 years, 1933-1945), 131 percent for Ronald Reagan (1981-1989), and 120 percent for Dwight D. Eisenhower (1953-1961).

But the biggest Dow gains, on a percentage basis, came during the 6-year tenure of Calvin Coolidge, from 1923 to 1929, during the "Roaring Twenties." The Dow soared 264 percent in those giddy, pre-Depression years.

Besides Mr. Wilson, the only other presidents who saw Dow declines in their tenure were Herbert Hoover, 83 percent, during the early years of the Great Depression, 1929-1933; Richard Nixon, who resigned after the Watergate scandal, 16 per cent from 1969 to 1974, and William Howard Taft, 2 percent from 1909 to 1913.

(All calculations were based on the last market close before presidents took office, left office, or died.)

There's still just over six months left for the Dow and the S&P to recover during Mr. Bush's time in the White House. Could we look for the Treasury Secretary to beat the drums for a stronger dollar? Will there be less tension in the Mideast? Will Mr. Bush work with Congress on a viable energy policy and solutions to the housing crisis?

Only time will tell. But boosting the Bush "legacy" could help a lot of investors, too.

Homer Brickey is The Blade's senior business writer.

Contact him at:

homerbrickey@theblade.com

or 419-724-6129.



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