US investors are set to reap the rewards in the run-up to the presidential election, according to new research from T.Bailey.
Based on data going back to 1970, eight out of the last nine presidential elections have seen positive US market returns in the preceding three calendar months, the funds of funds specialist found.
On average the growth between August and October inclusive in election years is 4.4%, which means annualised the returns have averaged 20.0% pa. This compares to just 0.9% in non-election years (equivalent to 4.5% pa).
T. Bailey senior analyst, Elliot Farley says: “Following the 2008 Olympics when all eyes were on China, the next major item on the calendar for many is the US election. It’s clear from our research that election fever is a positive driver of US equity markets.”
The group has been increasing its weighting to the US for nearly a year within its global fund of funds, the T. Bailey Growth fund. Its current exposure is 22% compared to 15% for the benchmark.
Farley says: “We took the view back in the last quarter of 2007 that Emerging Markets, and particularly China, were overheated and that developed markets such as the US offered better value. The US was first into the liquidity crisis and, thanks in part to swift and decisive action from the Federal authorities, we think it will be the first out.
“Our election research is yet further empirical evidence to support the view that this is a good place to invest at the moment.
“This is an unusual position for us – we have been running the T. Bailey Growth fund for nearly nine years now and for most of that time we have been underweight US and overweight emerging markets.”
Since the end of last October, the S&P 500 Index has outperformed the MSCI China Index by over 15%.IFAonline
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