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

 

8 October: Miley Cyrus Bangerz Tour Coming To Auckland!

Dainty Group announced today that global superstar Miley Cyrus will bring her BANGERZ TOUR to New Zealand in October this year. This will be Miley’s first ever visit to New Zealand and there will only be one Auckland show before she takes her tour to Australia. More>>

ALSO:

Music: Lorde NZ Tour Confirmed In Four Major Cities!

In what will be her first ever New Zealand headline tour, Frontier Touring and Brent Eccles Entertainment are stoked to bring you four epic shows across the country! The all ages concerts take place late October/ early November in Christchurch, Dunedin, Wellington and Auckland. More>>

ALSO:

Scoop Review Of Books: Poor Economics

A review of and excerpt from Jonathan Boston and Simon Chapple’s Child Poverty in New Zealand. More>>

Head Count: Highest Population Growth Since 2003

The country’s population grew by 67,800 people, or 1.5 percent, in the year to 30 June 2014. This came from natural increase (births minus deaths) of 29,500 and net migration (arrivals minus departures) of 38,300. New Zealand's estimated resident population was 4.51 million at 30 June 2014. More>>

Fun-Enhancement: Research To Ensure Even Game For Less Skilled Players

A University of Canterbury engineering PhD student is researching sports, such as table tennis, to ensure closer games for both better and less skilled players. More>>

Werewolf: From The Lost Continent

It’s a case of better late than never for Olivier Assayas’ marvellous After May/Apres Mai, which first screened at Venice in 2012, got a theatrical release in Australia – but not here – and only now appears on DVD, after Assayas himself has moved on. More>>

ALSO:

Werewolf: Blue Eyed & Soulful

Last year’s Muscle Shoals documentary was a reminder that on some of soul music’s most hallowed tracks, the studio band consisted of a bunch of white guys from rural Alabama... More>>

ALSO:

Final Event - Number Crunching: NZ Fifth Best Performer At Commonwealth Games

With a haul of 45 medals, New Zealand has outperformed the best predictions of the world’s number crunchers by 440% and beaten our past performance at the Commonwealth Games by 11% per cent, according to a Massey University finance lecturer. More>>

ALSO:

Get More From Scoop

 
 

LATEST HEADLINES

 
 
 
 
Education
Search Scoop  
 
 
Powered by Vodafone
NZ independent news