Start of index: Market close on 1/20/09 (Inauguration Day)
Obama Index
January 24, 2009
By Joe Chase of IndexBeating.com
Since Obama was elected there have been lots of articles and TV stories about how to “Invest in the Obama Administration” and profit from his infrastructure spending and economic stimulus activity. I was thinking that iShares, WisdomTree or another fund company would come out with an Obama ETF, but so far I haven’t heard of one. So I decided that I would make my own “Obama Index” and write a post about it.
The very day I was thinking about what stocks to put in the index, Jim Cramer unveiled his “Obama Accountability Index” consisting of, GM, GE, Caterpillar, Bank of America, Citigroup, and JP Morgan. He chose these stocks because they will recover if there is a recovery in the financial sector (BAC, C, JPM, GE) manufacturing (CAT, GM) and the overall American economy (GE). This is very heavy in the financial sector and manufacturing, but doesn’t include much else. I think Cramer failed to include some of Obama’s most important campaign promises. I think he should have included alternative energy and infrastructure.
For my Obama Index I chose General Electric to represent the overall economy, and Bank of America and a regional bank ETF to represent the financial sector. I added Caterpillar, Deere, and General Motors to reflect manufacturing and Honeywell for new building activity. I couldn’t use a solar ETF because they include mostly Chinese companies, so I chose three American solar companies, Evergreen Solar, First Solar, and SunPower. I included two small communication infrastructure companies, MazTec and Dycom. I also included Vulcan Materials, a company that makes materials for roads. Caterpillar will also benefit from new roads being built.
I think these companies will accurately reflect the effectiveness of Obama’s plans. It is important to note that this will take a long time for his plans to influence the earnings of these companies, and economic conditions will influence their stock prices in the short run. I think this should be looked at as a relative index to the S&P for the short run, and as an absolute return index in the long run.
Obama Index: One Month Check-Up
February 22, 2009
By Joe Chase of IndexBeating.com
In the one month since Obama’s inauguration, the S&P 500 has declined by 4.37%. The “Obama Index” has been performing much worse. The Obama Index has dropped by 21.22%, led by GM declining by nearly 50%, the same as Evergreen Solar, which represented a smaller portion of the index to begin with. Caterpillar, Bank of America and GE are all down by more than 25%. The only holdings that have gone up are Union Pacific (+5.82%) and SunPower (+0.23%). 11 out of 14 holdings have underperformed the S&P 500.
The first trading day after the stimulus package passed the Obama Index fell by more than 7.5%, compared to a 4.68% drop on the S&P 500.
One Month Individual Stock Returns:
One Month Individual Stock Returns
Obama Index: 100 Days
April 30, 2009
By Joe Chase of IndexBeating.com
After 100 days of Obama’s presidency, how is the Obama Index doing? The Obama Index has performed about the same as the S&P 500 in the past 100 days. The Obama Index has grown by about 8.25%, while the S&P has increased by 8.5%. The performance of each component can be seen in the next chart. There is a clear trend in the beginning where essentially all the stocks are declining at about the same slope. After the bottom on March 9 (also the S&P bottom) most stocks have increased. The exception is GM, which is still down about 50% from when Obama took office. Bank of America has nearly doubled in the last 100 days, however this is mostly because the stock price was so low when Obama took office.
Individual Stock Performance
This chart shows the return of each stock since the beginning of the index.
Individual Stock Performance Since Start of Index
In another view…
April 29, 2009
You can see that the S&P falls right in the middle of the Obama Index components, reminding one of the importance of diversification. Compare this with one month after Obama took office:
February 22, 2009
We can see that both the Obama Index and the S&P have been improving. Arguments can be made that Obama is doing a better job, people have more confidence in him, etc., and that conditions have changed and it has little or nothing to do with Obama. I think both have elements of truth, investors do have more confidence in him and his policies, but it also has a lot to do with things that happened in the banking sector that had nothing to do with Obama.
6 responses so far ↓
Barry Cunningham // January 27, 2009 at 4:33 pm |
Very interesting. We’ve had this same discussion in the office. How do you think the review through congress will impact the allocations?
Index Beating // January 27, 2009 at 4:39 pm |
It will be interesting to see the details & specifics of his plan and how they change as it moves through congress. It will be interesting to see if there is any buying opportunity from the time when we find out what will be in the stimulus until the time the stock market takes that into account and bids up prices on benefiting companies.
Wes // February 9, 2009 at 6:16 pm |
as the bill is closer to passing, the obama index has outperformed the s&p considerably, although I thought it would be a larger difference.
Obama Index: One Month Check-Up « Index Beating // February 22, 2009 at 4:25 pm |
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Index Beating // April 30, 2009 at 8:08 am |
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Obama Index: 100 Days « Index Beating // April 30, 2009 at 8:09 am |
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