As investors count down the days to one of the most highly anticipated and hotly contested US presidential elections in recent history, investors are thinking about various potential outcomes and how they might affect US stocks.
And while political factors can always play a role in the performance of US equities, analysis by global index provider FTSE Russell suggests that investors may want to look beyond any short-term market volatility around this year’s election and consider the longer-term impact of economic factors on their portfolio.
FTSE Russell examined the three-month US equity market moves for the past five US presidential elections as reflected by performance of the US large-cap Russell 1000® Index and the US small-cap Russell 2000®Index. Findings suggest the general financial backdrop of the time, rather than the prevailing political party, drives markets.
For example, the US equity markets declined after clean sweeps for the Bush 43-led Republicans and the Obama-led Democrats in 2000 and 2008, respectively, stemming in large part from the bursting of the tech bubble and the Global Financial Crisis driving markets at the time. And, by the same token, the US equity markets rose equally in 2004 and 2012 amid Republican- and Democrat-led election outcomes owing to the strong underlying economic pictures at the time.
Philip Lawlor, head of Global Investment Research, FTSE Russell:
“While it is easy to get caught up in the news of the day and put too much stock in election results to drive market performance, history shows a more nuanced story for US investors and underscores the importance of letting market analysis and historical data, rather than near-term anxiety, help inform our long-term investment outlook.”
Photo Credit: Mike Mozart via Flickr Creative Commons
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