STOCKMARKETS have tended to perform a lot better under Democratic than Republican Presidents. A 2013 paper found the S&P 500 had delivered a return more than five percentage points a year higher under the former party than the latter (since 1948). Growth of GDP, employment, real wages, profits and productivity were all better under the Democrats as well.

Despite that trend, investors are generally assumed to favour the Republican candidates, on the grounds that they favour a low tax, less-regulated economy. But this is an unusual election. A Bank of America poll of global fund managers found that a Republican victory is one of the two great tail risks facing the markets, along with EU disintegration.

Of course, that is because Donald Trump is the candidate. In some respects, his approach resembles that of previous Republicans; he favours tax cuts and reductions in non-discretionary public spending. But in others, he diverges significantly, particularly on free trade. Most of all, the problem lies with his tone; he has made some wild statements about foreign policy, the...Continue reading