Education Policy | Post Primary | Preschool | Primary | Tertiary | Search

 


Investors Should Ignore US election, Says Academic


Thursday, November 1, 2012

Investors Should Ignore US election, Says Academic

Investors all around the world are focusing their attention on the result of the United States presidential election next week, but a Massey University finance lecturer says the best investment strategy is to just ignore the outcome.

Dr Jeffrey Stangl, from the School of Economics and Finance, studied the industry returns for presidential election cycles from 1926 to 2006 – and found no evidence that political cycles drove the performance of particular sectors.

“It’s intuitive to think that the defence industry, for example, will do well under a Republican president because the Republicans spend a lot on defence contracts,” Dr Stangl says. “On the other hand, when the Democrats are in power, people believe their support for unions will translate into sectors like the automative industry performing well.

“These ideas are widely reported in the media – check out Sam Stovall’s Sector Watch for Businessweek for an example – but when you look at the numbers, it’s just not the case.”

Dr Stangl’s research into presidential election cycles is unique because it looks at the performance of stocks grouped by industry over an extended period of time. While previous research has shown that markets respond to whether a president is a Democrat or a Republican, the movement is often short-term and unpredictable in nature.

“At the end of the day, what we care about as investors is whether there is a profitable strategy that can be implemented,” he says. “When Reagan was elected, for example, the markets were euphoric in the short-term, but not in a way that let you predict which stocks to place your bets on.

“If you used the election of a Republican president as a signal to buy defence stocks and hold them for the next four years, would that translate into anything meaningful? The answer is no.”

Previous research has shown that the US stock market, as a whole, does better under the Democrats by about 9 per cent. Dr Stangl crunched the numbers to see if specific industries could provide an explanation for this – and again drew a blank. He believes the better market-wide performance is due to macroeconomic factors that impact stocks from all sectors.

Investors could consider investing in a market index when a Democrat president is elected, Dr Stangl says. Otherwise, he believes the best strategy is to just ignore the US presidential race all together.

“I wouldn’t pay any attention to the elections at all and keep my money where it is, based on value fundamentals,” he says. “I certainly wouldn’t be targeting particular industries based on the outcome.”


Picture caption: Dr Jeffrey Stangl, senior lecturer at Massey University.

ENDS

© Scoop Media

 
 
 
 
 
Culture Headlines | Health Headlines | Education Headlines

 

Eddie Izzard: UK Comedy Legend Returns

Hailed as one of the foremost stand up comedians of his generation. Star of stage and screen. Tireless supporter of charity. Runner. Political campaigner. Fashion Icon... February 2015, Eddie Izzard will bring his massive FORCE MAJEURE world tour to New Zealand with tickets going on sale at 10am on Tuesday 28th October. More>>

Festival Starts 28 Oct: Improv Fest Makes Up New Show

For any other festival, finding out less than two weeks from showtime that half the cast of a programmed show can’t make it to New Zealand would be a nightmare. Instead, the New Zealand Improv Festival Director Jennifer O’Sullivan saw an opportunity ... More>>

NZ Music Awards Finalists: Lorde, Sol3 Mio Top 2014 Tuis Charge

Lorde has taken the music world by storm during the past year and she co-leads the 2014 Tui charge with five finalist spots. Joining her is newcomer family opera trio, Sol3 Mio. They are followed closely by Ladi6 and David Dallas, both up for four awards each. More>>

From 'Luther' Creator: Major New Zealand Crime Series For BBC

Libertine Pictures and writer Neil Cross have teamed up with leading international TV producer Carnival Films to develop a major new crime series set in Rotorua. Libertine will develop the contemporary drama series with Carnival, producer of internationally-acclaimed British period drama Downton Abbey, for the BBC. More>>

ALSO:

Family Statement: Death Of Ewen Gilmour

“Ewen was a much loved and cherished member of our family, he was a larger than life character and by his very nature was kind, generous and always giving of his time to those who asked for his help." More>>

ALSO:

Auckland: St. Jerome's Laneway Festival - Line-Up Announced

Traversing seven cities and three countries, the festival has well and truly settled into its home in each state. From the grassy knolls and towering silos at home in Auckland, to the sparkling backdrop of the Maribyrnong... More>>

Scoop Review Of Books: No Longer An Island

Simon Nathan reviews 'Zealandia: Our Continent Revealed': The idea that New Zealand is part of a large submerged continent is not new... There was renewed interest in the extent of offshore New Zealand from the 1970s onwards with the start of offshore drilling for oil and gas, and this was given impetus by a UN agreement which allowed countries to claim an Extended Continental Shelf (ECS). More>>

Art: Simon Denny Recreates Kim Dotcom’s Personal Effects

Who owns what? How has the internet changed our relation to the world? These are two of the many questions Simon Denny raises in the latest exhibition at the Adam Art Gallery, opening on Saturday 4 October. More>>

ALSO:

Get More From Scoop

 
 

LATEST HEADLINES

 
 
 
 
Education
Search Scoop  
 
 
Powered by Vodafone
NZ independent news