Since the mid-1970’s stock markets have been indifferent to the make-up of the White House, according to Goldman Sach’s David Kostin.
In his latest note Kostin highlights charts that he and his team have been watching ahead of the elections. He believes that stock market performance over the medium term is impacted by the economy rather than investors’ response to political changes.
“Since 1976, the S&P 500 has offered approximately 10% total returns in the twelve months following a presidential election, regardless of which party wins that election. Performance is also very similar over shorter three and six month windows. However, median returns are slightly better early in Republican administrations, while during an entire four year term the equity market has somewhat higher returns under Democrats.”
Across sectors however in the past 35 years some divergent patterns have emerged. Cyclical stocks – stocks that are more sensitive to the economy – have performed better during Democratic presidencies. Meanwhile, defensive stocks – stocks that are stable irrespective of the stage of the business cycle like utilities – have performed better during Republican presidencies.
“One year after a Republican president is elected, Consumer Staples, Health Care and Financials have generally outperformed the S&P 500 while Materials and Tech have lagged. Following Democratic victories, Information Technology and Telecom stocks have led the market while Materials and Health Care have fallen off the pace.”
Here’s a chart from Goldman;