Tuesday, August 14, 2012

Playing the Election Campaign

The presidential election is coming up less than three months from now, and while the effects of this on our society will be many, there will also be an effect on investing. RBC Capital Markets has looked at the way various sectors have performed in the runup to a presidential election, and found that two sectors tend to underperform in that period: material producers and technology.

Since 1980, in the three months prior to a presidential election, those two sectors have lagged the overall S&P 500 60 percent of the time, by an average of 4 percentage points. Last time around, in 2008, technology stocks lost 23.9 percent of their value over that time frame, and material producers lost 29.8 percent. The whole market was crashing at that point - the S&P lost 19.5 percent - but the losses for those sectors still outpaced the whole.

There are no sectors on the other side of the ledger, ones that tend to outperform the larger market during election campaigns. According to RBC, most of the other sectors only beat the index about 50 percent of the time.

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