US election results shouldn’t affect returns, research suggests

Whether Donald Trump or Hillary Clinton are elected as the next US president should not matter a great deal for US markets – and assets should gain in the next six months.

This is the prognosis based on research from Source, a fund management firm, which has studied the impact on markets of the 11 previous US elections, including the last few where the vote was tight, as is the case with the present election which takes place in 16 days.

“US presidential elections have only limited impact on US markets,” said Source.

Its findings show:

  • Equities, bonds and the dollar remained in a tight range in the two months before the last 11 elections and all of them gained in the six months after, with around 4% total returns for treasuries and equities
  • There was little impact even in 2000, 2008, and 2012, when the candidates were within five percentage points of each other. Four out of five of the last five elections, including the current one, have had no clear leaders two months before the election date.

Paul Jackson, head of research at Source, said: “Equity bear markets in 2000 and 2008 and the resulting flight to safety clouds the analysis to some degree but generally, equities tended to be more volatile around the election date on average while the dollar remained in a tight range.”

Although a populist has become a presidential candidate, meaning the choice is not between “two sides of a centrist coin”, most US assets have performed strongly leading up to this year’s election, said Jackson.

©2016 funds europe

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