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Election of US President is Dependent on the Stock Market
Pinnacle Digest writes: In his latest weekly article, Adam Hamilton of Zealllc.com breaks the most important decision maker in this year’s election (and most previous presidential elections over the last century).
Hamilton explains how the stock market has been the most powerful influence on presidential elections - and more specifically, the two months leading up to the election. He documents the vast impact the markets have on Americans’ collective psyche. When a market is rallying, Americans feel more upbeat and willing to spend. This is known as the wealth effect. And when markets are down, anxiety takes hold and investors are looking for any positive change. They usually carry that mindset into the voting booth as well. More often than not, people vote with their pocketbooks in mind.
Hamilton explains that InvesTech Research did a study showing that stock-market performance has been the most reliable indicator of who will win the presidency for over a century!
Hamilton states “The methodology was simple. InvesTech looked at the stock markets’ performance in the 2 months leading up to every US presidential election since 1900. Since these elections are held on the Tuesday after the first Monday in November, always early that month, this essentially means how the markets did in September and October. This minor piece of data has correctly forecast nearly 9 out of 10 elections!”
To continue on this point, InvesTech found that if the stock market rallies in September and October (2 months before the election) the incumbent party nearly always wins the election and vice-versa. In fact, out of the last 28 presidential elections, this has proven true 25 times (89% accurate).
Hamilton uses Barrack Obama’s first run for the White House as an example. In the summer of 2008, Obama was way behind in all polls, running behind McCain. However, if you remember, the greatest market crash since the Great Depression really kicked into gear in September and October of 2008 (S&P lost nearly 24% in those two months) and Obama came from behind to win the election.
Adam Hamilton provides a ton of analyses on the markets impact on presidential elections. Click here to read this great report.