If history is anything to go by, US stocks are likely to perform better in the next 12 months under a President Obama than a President McCain.

Since 1928, the Standard & Poor’s 500 index has risen by an average of 9.3 per cent in the opening year of the six first-time Democrat presidents who have served in that time, from Franklin D. Roosevelt to Bill Clinton. Conversely, the index has dipped by 4.3 per cent in the first year of the six newly elected Republican leaders, Bloomberg data shows.

Economists believe that the first-year stock market performances of new Democratic presidents have benefited because they have tended to outspend their Republican counterparts, stimulating the economy in the process. But as we are always being told by investment funds, past performance is no guarantee of future returns and the question of how the stock markets will perform under today’s president-elect, compared with his vanquished opponent, is even more uncertain than usual.

James Owers, Professor of Finance at Georgia State University, said: “The market expects that regulations will be tightened more quickly and aggressively by Obama than by McCain, which is generally bad for company profits. But then it was lax regulation that got us into this mess and Obama has some very astute economic advisers. It is a question of who can get the best balance between regulation and economic stimulation.” Hugh Johnson, founder and head of Johnson Illington, a US fund manager, thinks that a McCain victory would be better for the stock markets in the short term, but that US shares would fare better under Obama long term. He said: “Although both candidates wanted to keep taxes low, Obama wanted to increase capital gains and dividend tax and to roll back the Bush tax cuts for the highest two income brackets. So McCain’s proposals will provide a greater stimulus to the economy than Obama’s, putting upward pressure on US shares. But in the longer term, the US deficit will go up and the economy will suffer.”

Analysts say that an Obama victory had been priced into the markets in recent weeks. However, the recent share rally is down to the likelihood of a further economic stimulus package rather than the prospect of an Obama presidency, they say.

Pete Najarian, an options trader in New York, said: “Whoever has been named president-elect, the fact that the decision has finally been made will bring a huge degree of relief. The market has been in such a volatile state in the past few months and we just wanted an answer on who the new president would be. In the past week and two days, share price volatility has dropped by about half and it should fall further now.” Jeremy Siegel, of the Wharton Business School in Pennsylvania, said that shares usually perform better on the day after a Republican president is elected, as investors, who are generally conservative, celebrate but in the long run, Democrats have had better returns. Professor Siegel studied stock returns in the days surrounding US presidential elections between 1888 and 2004.

From Monday morning to Wednesday night, US stocks rose by an average of 0.7 per cent in the event of a Republican victory. They dropped by 0.5 per cent, on average, over the equivalent periods of Democrat victories.

In 1967, Yale Hirsch released data based on the previous 134 years, which determined that, on average, shares performed better in the final two years of a presidential term, a trend he attributed to manoeuvring by the party in power to increase its chances of reelection.

“As presidents and their parties get anxious about holding on to power, they begin to prime the pump in the third year, fostering bull markets, prosperity and peace,” according to a recent edition of the Stock Trader’s Almanac, the monthly newsletter set up by Mr Hirsch, which covers the financial markets.

However, with stock markets down by 30 per cent this year, it would be unwise to put too much store in the long-held theories on the stock market’s relationship with the president.

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