A Republican win is not necessarily better than a Democrat win for the stock markets, despite the former party’s image as being generally more pro-business and anti-tax, says Fidelity Worldwide Investment.

According to a chart produced by the investment firm, over the last 12 elections spanning 48 years, the S&P 500 has delivered a higher average annual return under the Democrats. Meanwhile, the stock market tends to rally by more than 10 per cent on average after an incumbent is re-elected, according to Fidelity.

However, stock markets tend to perform best in the third year of an election term, a trend which Fidelity says might be tied to government spending within the presidential cycle, which tends to occur during the first and second years of an electoral term.

The observation that markets do not necessarily behave as can be assumed was recently mentioned by Kleinwort Benson, which pointed to the lack of correlation between GDP growth and market performance, arguing there is a strong linkage to monetary growth/contraction. Investment commentators such as Ken Fisher, author of books such as The Only Three Questions That Count, argues that an analysis reveals that periods of high budget deficits often coincide with strong stock market performance and vice versa.

Whatever the outcome this year, it will be interesting to note whether this historical trend is borne out.