Macquarie has identified an interesting trend in the Australian stock market where stronger returns are typically generated in the months following an election...

Macquarie has identified an interesting trend in the Australian stock market where stronger returns are typically generated in the months following an election which results in a change in government. It seems that stronger returns occur when there is a change in government as the market adjusts its policy expectations. The bank provides a graph which depicts returns to the All Ordinaries index since 1970 around periods of Federal elections. This trend is similar when looking across all elections but less pronounced as a re-election of an incumbent government is less likely to lead to significant changes in policy or direction. The Australian market has also underperformed global markets on average in the month leading up to a change in government, and then outperformed in the 6 months following. This may be associated with higher uncertainty prior to election and a firming of expectation post-election. (VIEW LINK)