Stocktake: Election outcome makes ‘shockingly little difference’ for stocks

Market impact of conservative versus liberal election outcomes ‘surprisingly similar’

Traders work at the New York Stock Exchange. Photograph: Johannes Eisele/AFP/Getty Images

Traders work at the New York Stock Exchange. Photograph: Johannes Eisele/AFP/Getty Images

 

Stocks have been all over the place in recent weeks as investors became gripped by election fever, but as veteran money manager and Research Affiliates founder Rob Arnott pointed out last week, the outcome makes “shockingly little difference” when it comes to long-term returns

Arnott referred to a 2017 study by the firm which found that, globally, the relative stock market impact of conservative versus liberal election outcomes are “surprisingly similar”. US stock returns have been better under Democrat administrations over the last century but that differential is largely explained by two years, 1932 and 2008, says Arnott.

Outside of the US, there is no real difference in the results. For example, returns were higher in France and Canada when the left was in power, but the differences were not statistically significant. By contrast, average returns were higher in Australia, Germany and the UK when the right was in power, but again the differences are not statistically significant.

As an example of how market outcomes can be counterintuitive, the Research Affiliates study notes that the best time to invest in French stocks in the last 75 years was during François Mitterand’s term.

“Despite punitive taxation, nationalising industries and sluggish economic growth, stocks rose 400 per cent”, it notes. “What’s good for the economy isn’t necessarily good for the share prices of existing enterprises.”

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.