Study: Stock Market is the Best Predictor of Elections

Voting Throughout American History Has Been Found to Correlate With Stock Market Price Fluctuations That Study Has Found Are the Best Predictor of Elections

Forget The Unemployment Rate – The Stock Market Is A Much Stronger Predictor of Incumbent Election Outcome

Less than three months to go and most pundits remain convinced that the jobless rate will dictate who wins in November.

But a landmark study, posted on the Social Science Research Network (SSRN), challenges the conventional wisdom about which factors truly motivate voters in presidential elections. The researchers studied every presidential re-election campaign in U.S. history back to George Washington’s successful bid of 1792. They found that incumbents who served during periods of rising stock prices typically do better in the elections than those who served during periods of falling stock prices. According to the study, the stock market is a better predictor of presidential re-election bids than the unemployment rate or other traditional measures.

“Social Mood, Stock Market Performance and U.S. Presidential Elections” by Robert Prechter, Deepak Goel, Wayne Parker of Emory University and Matthew Lampert of the University of Cambridge, amounted to a bold challenge to age-old conventional wisdom regarding what factors predict presidential re-election outcomes. “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. “Unemployment had no predictive value in any of our tests.” To use an analogy, if the incumbent election outcome were a dollar of income, the stock market contributes just shy of 33 cents of that dollar, whereas unemployment contributes just over a penny.

Even more dramatically – the results do not hinge on whether or not people ever actually owned or traded any stocks! It doesn’t matter whether voters are part of the 1% or the 99% — underlying social mood, as measured by the stock market, foreshadows which candidate wins the most votes, NOT, as we’re constantly told, “the economy, stupid.”