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Market Preview: Clouded by Question Marks

NEW YORK ( TheStreet) -- And now, the worries set in.

Summer's over and the rest of 2012 suddenly has more than a few big question marks hanging over it. The sellers traditionally come out of the woodwork in September and October has a talent for infamy but it's more likely that November that will take center stage this time around.

"What could be more uncertain than handicapping a presidential election more than two months away, and then projecting which agendas will be adopted by the supposed victor and approved by a yet-to-be reconstituted Congress?," wrote Sam Stovall, chief equity strategist at S&P Capital IQ, in commentary released Tuesday. "Regardless of who wins the election, or how the majorities shift in Congress, the victors won't be sworn in until January 2013, nearly a month after the U.S. faces the possibility of falling off the fiscal cliff. Therefore, it will be incumbent upon the lame-ducks to resolve this impasse in order to allow for the traditional post-election rally to materialize."

Interestingly, the historical data is soundly in favor of the Democrats when it comes to stock performance as well as growth in both GDP and corporate profits, according to S&P.

"Since 1900, there have been six stretches of Democratic presidents and six for Republicans, during which the S&P 500 rose a median 12.1% in price during each year that a Democrat occupied the White House, as compared with a median 5.1% gain under Republican administrations," Stovall noted. "In addition, since 1949, U.S. real GDP increased a median 4.2% per year under Democrats, versus 2.6% per year under Republicans."

Corporate profits, measured on a GAAP (generally accepted accounting principles) basis, have risen a median 10.5% per year since 1936 during Democratic administrations vs. an 8.9% advance under the GOP, S&P said.

"So while one might say that Democrats are the 'tax and spend' party, the important part of that equation may be the 'spend,'" Stovall wrote. "When you spend, that usually improves the economy and increases corporate earnings."

Citigroup, however, has a different take. The firm argues a victory for the challenger in a presidential election may be the best way forward for equity bulls, regardless of party affiliation. The data shows a median gain of 7.4% for the S&P 500 in the first year of the new term following an incumbent's loss vs. a rise of 1.2% if the incumbent stays in The White House.
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