ETFs and the Presidential Election | ETF Trends

Presidential campaigns are in full swing and November is just around the corner. Investors and politicos are carefully monitoring the equities market to try to glean any hints. With stocks and exchange traded funds rallying, the incumbent may hold out, S&P analysts say.

Since 1900, when the S&P 500 increased in the three months from July 31 through Oct. 31, the incumbent was re-elected, with an accuracy of 80%, Sam Stovall, Chief Equity Strategist for S&P Capital IQ, wrote in a research note.  The S&P recorded a 6.1% rise on average during these election years. [S&P 500 ETF at Highest Level Since 2008]

SPDR S&P 500 (NYSEArca: SPY) is up about 4.8% since July 31.

On the flip side, during eight elections since 1900, the party in power was voted out 88% of the time whenever the S&P declined in the July to Oct. period – the S&P saw a sell-off of 5.1% before the incumbent was replaced.

“I believe it has more to do with the pain than the person,” Stovall noted. “I believe Americans must be convinced that the economy is being so mismanaged that they would be willing to trade a known quantity (the incumbent) with an unknown quantity (the challenger).”

If Obama stays in the Oval Office, homebuilders would benefit from the further government aid. [Case-Shiller Prices and Pending Sales]