Finding Market Trends in a Presidential Election Infographic
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Next year will be a big year for United States politics. 2012 will mark another presidential election year, and many socially responsible investors are wondering whether there will be any impact on their investments as a result of all the hype. For voters, the presidential election will have political significance. For investors, the election potentially has financial implications too.
One of the major questions for many investors is whether or not they should change their investment portfolio in the lead up, duration and after the US presidential election. In order to determine what you should do, it's useful to look back at history to see the effects of elections on financial markets. A recently published presidential election infographic by Fisher Investments gives useful insights on the matter. Fisher Investments is an independent money management firm that is privately owned. In fact, the infographic demonstrates that there is actually a pattern in market movements as a result of presidential elections. Fisher Investments calls this pattern the Presidential Term Anomaly. On average, the stock market index historically provides the highest return in the third year of a president's term at 19.4%.
This is a rather interesting finding, and it can inform investors' decision making when choosing what to invest and when to do so. Nonetheless, while historical trends are useful guides to what will occur for the 2012 presidential election and beyond, this data should only be deemed as guides and not as concrete predictions of future performance. During the term of a president, there will still be plenty of other political, economic and social factors at play. Additionally, the president and the corresponding Congress will have considerable influence over changing tax laws, industry regulations and government spending, and these can impact on inflation, economic growth, interest rates and unemployment, which affect stock markets and investments. Furthermore, it's often the case that the forces of the free market capitalistic system of the country will have more of a direct impact on of the performance of investments than political forces.
Overall, investors need to stay informed on a wide range of topics that may impact on their investments. The political realm is certainly a field that investors need to become familiar with. In particular, the presidential election and the influence of the president during their term needs to be understood by investors. Socially responsible investors are often more concerned about the impact of politics on their portfolio than purely profit-making investors, as politics and presidents do have considerable power over the social wellbeing of the community.
