It has been said that the 2012 presidential election is one of epic proportions. While politicians and the copious amounts of advertisements they run during an election year are known for some exaggeration, there is only slight hyperbole in saying this presidential election will be one of the most important in some voters’ lifetimes.
With the margin between the President and challenger Mitt Romney narrow in most polls, this election is shaping up to be one that political buffs will remember for generations. It also is shaping up to be one that will have a profound impact on portfolios of all sizes.
There are crucial factors to keep in mind. Stocks historically fall in anticipation of a Democrat taking the White House and rise when the market thinks a Republican is going to win. The post-inauguration day results tell a different story. Equities historically perform better when a Democrat is in the White House, presumably because the market realizes it was scared for no good reason. Conversely, the market typically winds up disappointed with Republican administrations and equities have a tendency to lag under these regimes.
Another issue to be aware of is that stocks typically perform well in election years and then give back some of those gains in the year following the election. U.S. equities have lived up to the election excitement as the SPDR S&P 500 (NYSE: SPY) is up 9.6%. The SPDR Dow Jones Industrial Average (NYSE: DIA) is higher by 6.2% while the PowerShares QQQ (NASDAQ: QQQ) has led the way with a remarkable surge of almost 16%.
With the United States attempting to fight enormous fiscal deficits and the looming problems of entitlement spending still far from solved, you could argue that it does not matter who wins this election because more of the same in Washington could mean U.S. stocks will immediately be vulnerable to a new Romney administration or the continuation of the Obama establishment.
That is not a doomsday prognosis, but the volatility that could ensue following the November elections means the following list of exchange-traded funds (ETFs) almost certainly will be in play. Simply put, these are the "must know" ETFs ahead of the 2012 presidential election.