Chart of the Week: Electioneering

In the UK, we’ll have the traditional Bonfire Night fireworks tomorrow. Meanwhile, on the other side of the pond, US voters are going to the polls after an election campaign that has been notable for its own political pyrotechnics.

Whether Kamala Harris or Donald Trump will become the 47th US president seems to be on a knife edge. What will the result mean for markets? That’s still far from clear. However, it’s interesting to look back at historical data showing how US equities have fared in the year after the last 12 elections, going back to the 1970s.

As the chart below shows, the average return of the S&P 500 in a Democrat president’s first year in office is 20.6%. On the other hand, the market has only returned an average of 12.3% when a Republican has moved into the White House. However, election timing is likely to have been a significant factor here – with Republican George W. Bush taking office in 2001, just after the Dot Com bubble burst.

It’s also worth noting that since the inception of the S&P 500 in 1957, the index has delivered positive returns in 20 out of 24 election years.

You may be wondering which stocks have achieved the strongest post-election performance? Data shows ‘value’ stocks have outperformed ‘growth’ stocks in the six months after each election for the last 40 years. The story of the last few years has been of the Magnificent Seven, but is that about to change?

Key takeaway: regardless of who wins the election, are the Magnificent Seven tech giants likely to be eclipsed by a broader range of US companies in the months ahead?

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This article is provided for general information purposes only and should not be construed as personal financial advice to invest in any fund or product. These are the investment manager’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.