Presidential reputations rise or fall with gross domestic product. The state of the economy can determine if presidents are re-elected, and it shapes historical memory of their success or failure.
In the news media, we often use the handover of power as the time for assessing the economic record of the departing president. (I've done it myself recently.) Some economists have predicted that the Trump administration could create the next recession or financial crisis. And scholars have studied the relative economic conditions generated by Republicans and Democrats for predictive meaning (Democrats have done better since World War II, they found).
But the reality is that presidents have far less control over the economy than you might imagine. Presidential economic records are highly dependent on the dumb luck of where the nation is in the economic cycle. And the White House has no control over the demographic and technological forces that influence the economy.
Even in areas where the president really does have power to shape the economy — appointing Federal Reserve governors, steering fiscal and regulatory policy, responding to crises and external shocks — the relationship between presidential action and economic outcome is often uncertain and hard to prove.
It's this quirk in how we think that unfairly enhances the reputation of Ronald Reagan and Bill Clinton while unfairly diminishing the presidencies of Jimmy Carter and both George Bushes.
And if you think of the financial markets as the hyperactive cousin of the economy itself, this mental framework can cost you money.
We all have a tendency to think that a president whose policies we disagree with will be bad for the economy and the stock market. But looking at markets in such starkly political terms can lead to bad decisions. Ask a conservative who refused to invest in stocks while they notched a 182 percent gain during the Obama presidency — or a liberal who shorted stocks after Donald J. Trump won in November.
So what tools does a president actually have to shape economic outcomes? Fewer than you might think. Let's walk through the factors that determine economic results — from those that are more purely luck to those that do reflect a president's skill at overseeing the economy.