The Socionomics Institute has a study out put together by a number of experts who say that the opinions of pundits, the state of the economy or the presidential primary choice of Republican voters may not be the determining factors when the votes are counted next November. If you want to know the name of the next president, they advise keeping an eye on the stock market.
The study is called “Social Mood, Stock Market Performance and U.S. Presidential Elections” by Robert Prechter, Deepak Goel, Wayne Parker and Matthew Lampert. It’s been posted at the Social Science Research Network.
“The best single predictor of presidential re-election results that we found was the percentage change in the stock market during the three years that preceded Election Day,” said Goel. “Changes in stock prices had a positive, substantial and statistically significant association with incumbents’ performances in re-elections. We found that they accounted for more than a quarter of the variation in incumbents’ popular vote margins.”
The study traveled all the way back to the late 18th Century when George Washington successfully ran for a second term.
Other issues widely believed to strongly influence voters were also checked and found lacking as predictors compared to the market. “Inflation and unemployment had no predictive value in any of our tests,” said statistician Goel. “GDP was a significant predictor in some of the simple models, but it was rendered insignificant when we combined it with the stock market in multiple regression analyses. In contrast, the stock market was a consistent indicator of re-election outcomes.”
The authors say the results hold whether or not there was widespread or sparse stock ownership by the American public.
They predicted that as the Dow goes, so go the prospects for President Barack Obama.
They studied results for a number of incumbents throughout history:
* Thomas Jefferson (1804) +82.63%, Landslide Win
* Herbert Hoover (1932) -77.37% Landslide Loss
* Bill Clinton (1996) +63.82% Landslide Win
* Ronald Reagan (1984) +41.63% Landslide Win
* James Madison (1812) -34.44% Win (exception)
* Martin Van Buren (1840) -19.61% Landslide Loss