Election Day is all about Red States versus Blue States. Jack Ablin, the chief investment officer at BMO Private Bank, took that color-coded view of the world and applied it to the stock market.
Ablin looked at the long-term stock market returns of companies that are based in, or have a significant business presence in conservative and liberal states. He found that, since 1995, red-state stocks have beaten blue-state ones by 0.1 percent. But since President Obama took office, blue states have had a decided edge of about 6 percentage points a year. That advantage is due largely to California companies (like, say, Apple), which have rocketed more than 23 percent a year, well ahead of the 12 percent annual gains posted by the S&P 500.
Ablin also suggests another possible advantage for Obama: The market gains for companies in the nine swing states that will decide the election – Colorado, Florida, Iowa, Nevada, New Hampshire, North Carolina, Ohio, Wisconsin and Virginia – have all outpaced the S&P 500 over the last four years (see chart below).
“If stock market returns influence elections,” Ablin writes, “Obama will be helped.”