If History Is A Guide, Then Stock Market Investors Should Be Rooting For Romney

Citi’s chief U.S. equity strategist Tobias Levkovich shares an interesting historical pattern going all the way back to 1900 in his latest note to clients:

Thus far in 2012, the S&P 500 is up better than 7%. Yet, when considering what is better for the market in terms of incumbents winning versus challengers, the investment community should be rooting for the challenger as shown in Figure 7. Historically, in the year following an election, challenger wins tend to be more rewarding and this tends to be nonpartisan.

The average S&P 500 return when an incumbent is re-elected: 1.2 per cent.

The average S&P 500 return when an incumbent is not re-elected: 6.8 per cent.

Here is Figure 7. We annotated the incumbents in red and the newcomers in green:

S&P 500 performance following US presidential elections since 1900

Photo: Citi

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