Why Investors should pray for Obama
Article: Canadian Business
Published: October 24, 2012
Article Written by: Bryan Borzkowski
Summary:
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| Stovall quotes "It won't be a great year" for 2013 |
Sam Stovall, S&P Capital IQ's chief investement strategist explains the behaviour of the presidential cycle affecting the stock market. Recently, Sam has looked at the market data between 1900 and 2012 to understand how politics affects the S&P 500 Index. Mr. Stovall stats that if Canadian investors could vote, they'd want the odds to weigh for Obama to be eleceted president. Ned Davis Reasearch explains that when an incumbent Democratic wins, the market turns on average, 16.8% in the post election year. Whereas when the incumbent Democrat loses, the market drops 10.2%. If we get lucky best scenario is, if Obama wins his party will be controlling both the Senate and the House of Representatives. In the 38 years that the Democrats controlled all three bodies, according the Stovall the market returns, on average, 8.4%. If Romney wins and the Republicans take the Capitol, the average return is 6.7% over 29 years. What Canadian investors want to avoid is if there is a split Congress with Romney at the helm, because when a Republican leads a divided Washington the market is turned to a averaging 3.2%. On the other hand, if Democrats split Congress the return averages to 7.5%. Stovall also mentions that if Obama wins it will benefit industries like gold, alternative energy health care. If Romney wins then he will push forward energy, financials, rail roads and utilities.
Opinion:
Personally, I think that Sam Stovall's expectations and patterns for the stock market are very interesting. His patterns on politics affecting the market are extremely wise. From what Stovall says, I think this is a heads up for all of the Canadian investors watching presidential election. November 6th will be a shocking day for not only the Americans but for Canadians too. If I were a investor I would pray for the best, because from the sounds of it, 2013 will be a rocky year.