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Want to Know Who’s Going to Be President? Ask the Stock Market

  • Written by Syndicated Publisher No Comments Comments
    February 19, 2012

    What’s the biggest influence on the outcome of presidential elections?

    Many observers would identify the role of campaign spending by super PACs, a candidate’s debate performance, and, of course, the health of the economy (“stupid”).

    Yet if you want an answer backed by a large body of evidence, you’ll find one in the recently-published, landmark research paper by Robert Prechter, Deepak Goel, Wayne Parker and Matthew Lampert, titled “Social Mood, Stock Market Performance and US Presidential Elections.”

    A lot of time, data analysis, and copious statistical evidence led them to this straightforward result: “Social mood as reflected by the stock market is a more powerful regulator of re-election outcomes than economic variables such as GDP, inflation and unemployment…”

    In other words: If you want a good predictor for the result of an incumbent president’s re-election, look to the stock market.

    Large amounts of earlier research have focused on stock performance after a presidential election. But very few scholars have reversed that order, to investigate a possible link between elections and preceding stock market performance. So reverse that order is what the authors did. What’s more, they’re the only ones to study the issue from a socionomic perspective — the premise that waves of social mood simultaneously drive the valuations of stocks and sitting presidents.

    The group published their research on January 17, and it’s already getting attention. A Washington Post columnist read the paper and got its practical usefulness, by noting that Obama should benefit from a stock market that’s been mostly higher since 2008, while a Republican challenger “should hope the Dow crashes.”

    You can read the entire research paper yourself by following this link >>

    Images: Flickr
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