While the forthcoming US elections on November 5 may have short-term impact on domestic stocks, history suggests there is no clear correlation between Democratic or Republican party coming to the power and the performances of US and Indian stock markets.
The present US president Joe Biden, a Democrat, took office on January 20, 2021. Since then, US indices Dow Jones and S&P500 delivered returns of 57.3 per cent and 69.6 per cent, respectively. Nasdaq, in fact, surged 142 per cent during this period. Against this, Nifty delivered a 75 per cent return in the Biden's tenure .
Former US president Donald Trump, a Republican, was in the office from January 20, 2017 to January 20, 2021. During his tenure, Dow Jones gained 45.3 per cent, S&P500 advanced 52.8 per cent and Nasdaq climbed 77 per cent, but Nifty underperformed the three indices, delivering 38 per cent returns.
Barack Obama, a Democrat, stayed in the office between 2009 and 2017. In Obama's first tenure from January 20, 2013 to January 20, 2017, Nifty rose 45 per cent against drops of 24.1 per cent in Dow Jones, 31.5 per cent in the S&P500 index and 30 per cent in the Nasdaq.
In his second tenure from January 20, 2017 to Jan 20, 2021, Nifty rose a massive 117 per cent against gains of 118 per cent in Nasdaq, 71.7 per cent in Dow Jones, 84.5 per cent in the S&P500 index, JM Financial said in a note.
Meanwhile, the George Bush tenure also saw US indices falling, but Nifty rising. The Republican was in the office from January 20, 2005 to January 20, 2009. Nifty delivered 45 per cent return during that period, against falls of 1.1 per cent for Dow Jones and 12.4 per cent for S&P500 index. Nasdaq tumbled 26 per cent during the same period.
"There is no clear correlation between the party in power and performance of indices during the party’s tenure. Market returns are dependent more on the state of the economy and the policies of the party in power. Hence, it is critical to understand what each candidate or party stands for to figure out the impact on various sectors," JM Financial said.
In the forthcoming US elections, Trump’s proposed policies of lower corporate taxes, higher tariffs on China and incentives for local manufacturing are expansionary in nature and could lead to higher interest rates, a stronger US dollar and slowdown in global growth. He also intends to withdraw from the Ukraine-Russia war.
"Harris’ proposed policies are more about maintaining the status quo, though she does intend to implement higher taxes on corporates and wealthy Americans. She intends to protect the interests of the middle class/ low income groups. Support to the Ukraine-Russia war and NATO should continue," JM Financial said.