AMERICAN stock markets tend to thrive in the run-up to a presidential election, according to research by Investors RouteMap, an independent financial adviser in Britain.

“It may be the government manipulating the economy or it may be simply that the hype from both parties makes everyone think the future is going to be better,” says Nick Dewhirst of Investors RouteMap.

Currently shares in pharmaceutical firms, such as Becton Dickinson, the industrial conglomerate Leggatt & Platt, and housing firms such as Masco and Pulte Homes are performing well, according to Kevin Walsh, a portfolio specialist with Bank of Ireland Asset Management.

What everybody wants to know is what will happen after the election if the Republican George W Bush retains the White House or if his Democrat rival John Kerry becomes president.

“The Democrats are seen as a tax and spend party, whereas the Republicans are seen as good for business,” says Eugene Kiernan, the head of asset allocation at Irish Life. He adds that this has not always been the case and that particular sectors are more likely to be affected, rather than the market as a whole.

“For example, when Bill Clinton was elected, Hillary (his wife) was going to get involved in healthcare and introduce big reforms,” says Kiernan. “That idea had a savage impact on the share prices of pharmaceutical companies although nothing really happened in the end and they recovered.”

One sector that is particularly likely to be affected under a change of administration is defence. Colin Hunt, an economist with Goodbody Stockbrokers, says: “The defence area may well fall victim to fewer resources under Kerry, so there would be obvious implications for companies dependent on defence contracts.”

Not all defence firms would be affected equally. Walsh says armaments firms manufacturing the heavy machinery of war are more likely to suffer while firms focusing on high-tech defence products should continue to do well.

Many analysts believe the importance of who is president and which party is in power can be overstated in relation to the stock markets.

“Five or six years ago, the question was ‘Who is more important for the US stock market, Bill Gates or Bill Clinton?’ The answer was Bill Gates,” says Kiernan.

“Ultimately, if government does not interfere with the running of business, it is not such a big issue.”

But the Senate, the House of Representatives and the presidency may not be all under the control of the one party, and that is likely to slow down legislative and political progress which could affect the markets.

“There probably will be some element of divided government after the election. In the US, you can end up with a stalemate. There is lots of jaw-jaw but nothing happens,” says Walsh.