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Which Sectors to Watch after a Presidential Election

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Nov. 8 2016, Published 9:34 a.m. ET

Sector performance

In this final part of the series, we’ll try to identify the best-performing sectors after a presidential election.

The S&P 500 has generated an annualized return of 7.0% in the last 27 years. Materials topped the sectors with an annualized return of 22.0%. Healthcare and IT (information technology) have beaten the index with an annualized return of 10.0%.

The consumer sector has returned 8.0%, and energy and industrials have returned 7.0%. The rest were beaten by the index. Financials recorded a return of 5.0%. Utilities had a return of 4.0%, and telecommunications returned 2.0%.

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After a presidential election

Utilities and consumer discretionary were the only sectors to record positive returns three months after an election. Among the rest, financials recorded the biggest negative return, followed by IT. Energy recorded the lowest negative return.

Materials, consumer discretionary, energy, and utilities were the only sectors with positive returns six months after an election. Healthcare was the worst performing sector, followed by IT and consumer staples (XLP). Telecommunications recorded the lowest negative return.

Materials, consumer discretionary, and energy were the leading sectors one year after an election. The rest of the sectors generated negative returns led by utilities and healthcare. Industrials recorded the lowest negative return.

Once we exclude the recessionary period of 2008–2009, you can see that IT and healthcare were the only sectors with negative returns three months after an election. Consumer discretionary was at the top, followed by financials.

Six months after an election, conditions for IT and healthcare worsened, and consumer staples generated negative returns. Materials was the best-performing sector.

One year after an election, IT remained the worst-performing sector, followed by healthcare. Utilities, consumer staples, and telecommunications also generated negative returns. Materials (JNUG) (DUST) (JDST) continued to perform.

Incumbency factor

Energy (OIH) (IYE) recorded the highest returns three months after a reelection, followed by financials (KBE) (XLRE), healthcare, and consumer staples. Telecommunications had the lowest return.

Six months after a reelection, healthcare recorded the highest returns, followed by energy and consumer staples. Telecommunications recorded the lowest return.

Energy recorded the highest return one year after a reelection. Healthcare, financials, and IT were next. They were followed by consumer staples and industrials. Telecommunications, utilities, and materials had the lowest returns.

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