Obama better bet for US stocks?

September 19, 2012

The wealthy in the United States have a reputation for being firmly on the side of the Republican Party, but maybe they shouldn’t be for the November presidential election.

According to Tom Stevenson, investment director at asset manager Fidelity Worldwide Investments, past evidence points to Democrat Barack Obama as possibly the more lucrative bet for equity  investors.  He says:

Looking at stock market performance following the last 12 elections suggests that investors should, in the short term at least, be rooting for an Obama victory. History shows that markets tend to rally after a win for the incumbent party by more than 10% on average, but fall modestly if the challenger is successful.

The graphic below provides the comparitive returns after Democrat and Republican presidential election victories.

 

But there’s more.  U.S. Big Business  tends to support the Republican Party which supports lower taxes and less government involvement in the economy.  But Fidelity says this stance has not delivered stock market returns; in fact the S&P 500 has delivered an average annual return of over more than 10%  under the Democrats in the past half century, compared with around 5% under the Republicans, Fidelity says.

 

Online polls from Reuters/Ipsos last week  gave Obama a 7 percent lead over Romney, 48 percent to 41 percent among likely voters. Fidelity says  the odds of Obama being re-elected are closely correlated with the performance and level of the S&P500. Obama supporters (and maybe stock market investors) will be hoping the index, up 16 percent so far this year,  holds up until Election Day.

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