“America's Dow Jones Industrials Average has risen in the third year of a Presidential term on every occasion since Harry S. Truman in 1951 – that's sixteen times in a row and it has not mattered whether it was the President's first stint in office or second, which party he represented or who controlled Congress,” says Russ Mould, AJ Bell Investment Director. “Barack Obama may be a Democrat but Republican control of Capitol Hill has been no bar to strong stock market performance, as the Dow Jones rose in 1995 and 1999, when the last two-term Democrat, Bill Clinton, faced exactly the same circumstances.”
Ultimately, profits and cash flow determine equity valuations and share prices, but policy in Washington can influence them, especially in the case of certain sectors. Energy is one area where the Republicans are expected to focus their efforts, approving new pipelines and gas exports, to the potential benefit of oil services and equipment firms, as well as the Master Limited Partnerships (MLPs) who own and operate the pipelines.
Notes for Editors
- On 5 November, the Republican Party gained seven seats in the Senate (with two to be determined) and 13 in the House of Representatives to give them control of both for the first time since 2005.
- The Dow Jones Industrials has risen by an average of 17.0% during the third year of sixteen presidencies since 1948. This compares to an average gains of 5.6% in year one, 6.6% in year two and 4.8% in year four (see spreadsheet attached).
- Obama is the sixth two-term President since 1948. For the other five, the Dow Jones fell in the final year of Dwight Eisenhower, Bill Clinton and George W. Bush but rose under Ronald Reagan. Richard Nixon had already resigned, although the Dow rose under his replacement, Gerald Ford.
- Two Exchange Traded Funds listed in London enable investors to track the MLPs who operate the pipelines. They are ETF Securities US Energy Infrastructure (EPIC code: MLPX) and Source Morningstar US Energy Infrastructure (EPIC code: MLPA).