Although President Bush's electoral chances seem to be improving, public-opinion polls and the parlous state of the economy still appear to favor a Clinton victory in November. What might such a prospect bode for the stock market in the months and year ahead?
To find out, economist Gregory E. Gieber of Smith Barney, Harris Upham & Co. examined the historical record of market movements in each of the 12 instances since 1884 in which control of the White House changed political parties. What he found was that despite the high degree of uncertainty that presumably attended such elections, "the market tends to do well in the months just prior to a Presidential election."
The pattern after an election in which an incumbent party loses is less consistent. While the stock market posted an average gain of 2.4% in the 12 months following such elections, the results varied widely, with both parties posting as many gains as losses. On average, the Standard & Poor's 500-stock index rose by 7.6% from November to November in the six times that Democrats captured the White House and fell 2.9% when power passed to the Republicans.
The upshot, says Gieber, is that history offers little clue to the impact of a Clinton victory on the stock market. But it does suggest that "the election will probably have little impact on the market in the near term." The biggest influence, he believes, will continue to be the monetary environment, which he feels "remains highly favorable."