In general, defensive style factors (yield, low volatility and quality) and defensive sectors (energy, consumer staples and utilities) saw deteriorating active performance, and cyclical sectors (information technology) generally benefited after elections. This certainty, or the lack of it, has historically impacted performance of style factors and sectors. However, a flip in control has led to uncertainty around the ability of the president's party to pass bills and influence regulations, leading to enhanced volatility on a relative basis. The status quo generally translates into continued stability of the policy and economic roadmap with the reigning political party maintaining similar levels of control in terms of achieving its mandate. One way the two election outcomes are different is in how they feed into market certainty and uncertainty. ![]() US equity market performance following midtermsīased on gross USD performance of the MSCI USA Index from 1978. We compared pre- and post-election performance to minimize the impact of other externalities such as macro-economic environment, which may also be driving the performance of equity markets (shown below). Interestingly, a flip in control hasn't meant a drawdown relative to the price performance observed prior to the election. equity market has, on average, reacted positively to the reigning political party's ability to retain its position in both chambers of Congress. Our research takes a unidimensional view on how election outcomes have impacted historical-market performance and does not account for other key market forces that were in play.
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