Michael Sivy Right before major elections, market pundits always try to pick the stock sectors that will benefit if a particular candidate wins. In reality, it's a pretty dumb exercise. The connections between politics and the stock market are far more complex than most people realize. Industry-specific issues almost always trump politically driven trends, and, in any case, those trends are usually reflected in stock prices long before elections take place. Still, it's worth taking a look at the historical patterns and seeing how they might apply to the current market.
Most investors assume that a Republican president is better for stocks than a Democratic one.
That turns out to be false. Interestingly enough, though, small-company shares tend to do better under Democrats, while bonds perform better under Republicans. But that traditional pattern for bonds may not hold this time around, because the Democrats look like the bond market's best friend. Specifically, Al Gore is more committed than George W. Bush to paying down the Federal debt. The most interesting historical pattern is that divided government is the most favorable environment for stocks.