The index rallied by more than 9 per cent in six of the eight years, and only failed to break even in 2001, during the very worst of the dot com crash.
Performance of indices in year after US election
| Name |
2009 |
2005 |
2001 |
1997 |
1993 |
1989 |
1985 |
1981 |
| S&P 500 |
9.02 |
15.19 |
-10.75 |
36.26 |
9.74 |
42.69 |
1.2 |
12.99 |
| FTSE 100 |
27.33 |
20.78 |
-14.09 |
28.68 |
25.19 |
41.55 |
N/A |
N/A |
Source: FE Analytics
The average return over the eight 12-month periods is 14.6 per cent.
The FTSE 100 has also prospered in the aftermath of the US election. Since its inception in 1984, the index has rallied by at least 20 per cent in five of a possible six calendar years, posting an average 12-month return of 21.6 per cent.
While many commentators point to the stellar performance of markets in the year of a US election, our research suggests that investors would be better off waiting for the president to be announced before investing their cash.
Although the S&P 500 rallied during the election years in the 1980s, it posted losses in 2000 and 2008, and only just managed to break even in 2004, with returns of 1.63 per cent. The average return over the eight presidential election years since 1980 is only 2.46 per cent.
Performance of indices since 2000
Source: FE Analytics
Macro themes have, of course, undoubtedly influenced these year-to-year fluctuations, but AWD Chase de Vere’s Patrick Connolly thinks the election has a significant impact on the markets.
"There are definite boosts to the market before and after the election," said the head of communications. "In the lead-up to the election, the sitting president is unlikely to make difficult and unpopular decisions with regards to the economy. These tend to come half way through a term."
"Voter-friendly policy tends to drive consumer confidence, which has an obvious effect on the markets. Moreover, the results of an election create political certainty for at least four years; markets always like to know where they stand," he added.