Now that Barack Obama has secured the US presidency, what is in store for the investors? Although there are several monumental factors affecting the current economic environment (tightening credit, energy concerns, and a costly war), there is historical evidence that shows the stock market has behaved favorably while a Democrat occupies the White House. A study published by Wilmott Magazine reveals that in the first year following an election, the S&P has gained an average of 6.58% when a Democrat has won versus an average of 1.87% following a Republican victory.
Small cap returns are typically greater while a Democrat presides over the country, whereas large cap stocks perform better during a Republican presidency. On average, the last two years of a term outperform the first two years. The S&P has historically seen a 16.13% return in the last two years of Democratic presidency, and the gains were just 15.03% during the last two years of a Republican term.
Our expert analyst Nathan Threebes concludes - “If there is any indication there could be better times ahead, you should still be cautious. Returns during February and March have shown losses (-0.38% and -0.58% respectively) following a Democratic inauguration. Mr. Obama has a lot of work to do to buck that trend”.
