The build-up to a US presidential election is good news for investors in US equities, says T. Bailey.

Research from the fund of funds specialist shows that in eight of the last nine elections, markets have delivered positive returns over the three calendar months leading up to the election.

On average, the growth between August and October inclusive in election years is 4.4 per cent – annualised, the returns have averaged 20 per cent, compared with just 4.5 per cent per annum in non-election years.

Elliot Farley, senior analyst at T. Bailey, says, ‘Following the 2008 Olympics, when all eyes were on China, the next major item on the calendar for many is the US election. It’s clear from our research that election fever is a positive driver of US equity markets.’

As a result of its findings, T. Bailey has been increasing the weighting to the US within its global fund of funds, the T. Bailey Growth Fund, for nearly a year. Its benchmark exposure to the US market is 15 per cent but the portfolio currently has 22 per cent weighting to the US. At the same time it has been underweight on emerging markets.

Farley says, ‘We took the view back in the last quarter of 2007 that emerging markets, and particularly China, were overheated and that developed markets, such as the US, offered better value.

‘The US was first into the liquidity crisis and, thanks in part to swift and decisive action from the Federal authorities, we think it will be the first out.’

Since the end of last October, the S&P 500 Index has outperformed the MSCI China Index by more than 15 per cent.