March 6 (Bloomberg) -- President Barack Obama now has the distinction of presiding over his own bear market.
The Dow Jones Industrial Average fell 20 percent since Inauguration Day, the fastest drop under a newly elected president in at least 90 years, according to data compiled by Bloomberg. The gauge has lost 53 percent from its October 2007 record of 14,164.53, slipping 4.1 percent to 6,594.44 yesterday.
More than $1.6 trillion has been erased from U.S. equities since Jan. 20 as mounting bank losses and rising unemployment convinced investors the recession is getting worse. The president is in danger of breaking a pattern in which the Dow rallied 9.8 percent on average in the 12 months after a Democrat captured the White House, according to data compiled by Bloomberg.
People thought there would be a brief Obama rally, and that hasnt happened, said Uri Landesman, who oversees about $2.5 billion at ING Groep NVs asset management unit in New York. It speaks to the carnage thats in the economy and the lack of confidence in the measures that have been announced.
A bear market is defined as a decline of 20 percent or more.
Buying shares is a potentially good deal for long-term investors, Obama said March 3. He compared daily fluctuations to a tracking poll in politics and said he wouldnt adjust his policies just to meet market expectations.
Congress last month enacted Obamas $787 billion package of tax cuts and spending on roads, bridges and public buildings. His 2010 budget indicated the governments financial rescue may need another $750 billion after an initial $700 billion.
Getting Cheaper
The Dow average has dropped 31 percent since Obamas election. The 30-stock gauge trades at 8.04 times annual earnings, the cheapest since 1995 and down from 10.06 times on Inauguration Day.
Citigroup Inc. led the plunge, losing 71 percent. The government proposed taking a 36 percent stake in the New York- based bank, cutting the percentage owned by shareholders. Detroit-based General Motors Corp. tumbled 53 percent after the largest U.S. automaker said it needs more government aid.
Its the Obama bear market, said Dan Veru, who helps oversee $2.8 billion at Palisade Capital Management in Fort Lee, New Jersey. We dont know what the rules are in so many different areas the government is touching.
The Dow average gained 2 percent to 6,726.18 as of 9:49 a.m. in New York today after a government report showed the rate of job losses slowed last month.
Bank Losses
The U.S. economy contracted at a 6.2 percent annual rate in the fourth quarter, the most since 1982, the Commerce Department said last week. Unemployment jumped to 7.6 percent in January, the highest since 1992, as Americans fell behind on their mortgages and banks seized homes at a record pace.
Losses at financial companies worldwide that grew to about $1.2 trillion sent the Standard & Poors 500 Index to a 38 percent retreat last year, the steepest since 1937.
Prospects for recovery in the financial sector, despite all the government help, still seem rather remote, said John Carey, who manages about $8 billion at Pioneer Investment Management in Boston. Weve had a weak economy for a couple of years, and we arent seeing the stimulus working at this point. That is what weighs on investors minds.
The Dow average took eight months to decline 20 percent following the inauguration of George W. Bush, reaching the level on Sept. 20, 2001, nine days after terrorists attacked the World Trade Center in New York and the Pentagon in Washington.
Herbert Hoover
The crash of 1929 occurred seven months into the administration of Herbert Hoover, who presided over an 89 percent plunge in the Dow between September 1929 and July 1932, the steepest retreat ever.
Only twice has the benchmark gauge slipped in the 12 months after the election of a Democratic president since 1900, after Woodrow Wilsons victory in 1912 and Jimmy Carters in 1976.
The Dow entered its most recent bear market on July 2, 2008, when a 167-point decrease gave it a 20 percent loss from its record 14,164.53 on Oct. 9, 2007. Unlike the Standard & Poors 500 Index, the Dows rally from its November low of 7,552.29 fell short of a 20 percent bull market gain, ending at 19.6 percent.
Obama should be listening to the stock market more than talking to it, said Kenneth Fisher, the billionaire chairman of Woodside, California-based Fisher Investments Inc., which oversees $22 billion. He hasnt gotten out of the gate well.
