Election campaigns tend to create political uncertainty that can have a negative impact on the markets. Once an election outcome is known does the party in power make a difference?

If history is any guide, as shown in the chart, the markets like Democrats.

Average S&P 500 Performance
by Party in the White House :

Since 1904, the average annual S&P 500 price performance by party shows that under the Democratics’, markets advanced by 7%, while under Republican guidance, they advanced only 5%.

The same findings are true and even more dramatic for the U.S. Dow Jones Industrial Average. Since 1900, the median performance in the 12 months following the election of someone new to the White House saw the Dow rise 9.8% after a Democratic win and fall 2.5% after a Republican win.

Here in Canada, over the short term, markets tend to reacted favorably to election wins by both Liberals and Conservatives. Although no one can predict whether markets will advance on the election results, the historic win of Democratic U.S. president Barack Obama should give markets some reprieve from political uncertainty and provide an additional level of confidence to the global marketplace.