The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (TheStreet) -- This week marks six months until election day. During the next six months, the elections will likely become an increasingly potent driver of the markets. While we believe the impact for changes to the makeup of Congress may be more meaningful than the presidential election, we will tackle that in a later commentary. In this week's commentary, we focus on the presidential election's relationship to the performance of the markets and economy. Specifically, we address: The market's impact on the election, The election's impact on the markets, The economy's impact on the election, and The election's impact on the economy.
Market Impact on Election
Perhaps surprisingly, the stock market does not predict the outcome of the election. A strong stock market does not appear to favor an incumbent nor has a weak stock market acted as material negative. For example: Franklin D. Roosevelt was re-elected in a landslide victory in 1940, despite losses in the S&P 500 in the third and fourth years of his term. Harry Truman (1948) and Richard Nixon (1972) also were re-elected in the face of lackluster stock market results. Adlai Stevenson lost in 1952, even though the stock market rose over 50% in the two years before the election under his party's leadership. Incumbent George H. W. Bush lost in 1992, even with a 57% gain in the stock market during his tenure. Al Gore was unable to secure the presidency in 2000, despite the powerful eight-year stock market gain while under his party's tenure in the White House.
History shows that voters are unwilling to attribute moves in the market directly to presidents, either positive or negative.
Election Impact on Market
Historically, the election does appear to have a significant impact on the stock market. This is explained, in part, by the material impact on corporate profits of regulatory policy guided by the White House and legislation passed by Congress. Industries that are heavily regulated are the most affected; these include: Health Care, Utilities, Telecommunications, Media, Energy, Materials, and Financials.