Telegraph.co.uk – The American Presidential election next month may have significant implications for investors because the US remains by far the largest economy in the world.

Senators McCain and Obama have articulated differing approaches to taxes, trade, foreign policy and the government’s role in its citizens’ lives. The question is, will the candidates’ distinguishing campaign rhetoric will be just that: rhetoric? Will the policies the winner actually puts in place be similar or differ significantly from the Bush presidency?

Research based on the past 80 years shows that American stock markets have performed better under Democrats, while American government bonds performed better under Republicans. These results should be taken with some caveats as we have seen the two major political parties move to the middle of the political spectrum, as has happened in the United Kingdom. For example, Republican President Bush has presided over the largest increases in domestic spending, excluding defence, since the Democratic President Lyndon Baines Johnson.

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