Presidential Elections Signal Impact on Quant Factors
Man Group's analysis examines the historical impact of US presidential elections on stock market returns and volatility through quantitative factors.
Investment firm Man Group PLC has released findings on how US presidential elections historically affect quantitative investment factors. The research indicates that price movements for both industry and style factors typically increase during election years compared to non-election years.
Utilizing its MacroScope model, Man Group observed that over the long term, factors like Earnings Yield and Size have often performed better in anticipation of a Republican presidency and underperformed during one. Conversely, expectations of a Democratic victory are frequently associated with outperformance in Momentum, Growth, and technology-related factors.
The study, which covers US presidential elections from 1996 to 2020, suggests that sectors sensitive to policy and regulatory shifts, such as semiconductors and internet software, tend to underperform leading up to elections. Industries like biotechnology and pharmaceuticals have, however, often shown stronger performance.
Man Group's current assessment suggests that Momentum and Beta, alongside the Biotechnology and Software Services sectors, are favored in the present electoral landscape. The firm emphasizes that systematic risk modeling is a valuable tool for predicting returns during election periods.