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Stock Market: John McCain Will Not Be President

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John McCain Not Happy With Stock MarketThat’s the proclamation of the stock market in a resounding fashion.

I always find it entertaining when pundits draw ridiculous correlation relationships between the stock market and [insert something popular at the time]. This time, it’s the winner of the Presidential election in November and the performance of the stock market three months beforehand.

What’s fun is that the CNBC article, Who’s the Next President? The Stock Market Might Know, was written on August 26th – predating all the thick of the market turmoil. The largest single day drop of 777.68 in the Dow didn’t occur until September 29th, almost a month later. The second largest single day drop of 733.08 in the Dow didn’t occur until the 15th of October! (though we did see the single largest point gain on Oct. 13th, a gain of 936.42 in between).

So, you might be wondering how the recent changes in the market have affected the chances of our candidates?

According to the article, an up market in the three months prior to an election signaled victory for the incumbent party 80% of the time, since 1928. At the time the article was written, the S&P 500 was up about 2%. As of Monday’s close, Oct. 20th, the S&P had fallen from it’s August 1st close of 1,269.42 to 985.40. -22.4%!!! Incumbents aren’t looking too good here.

“A poor stock market performance usually anticipates and/or accompanies a weak economy—and that usually leads to the ouster of the ruling party and its president (think Herbert Hoover, Jimmy Carter and George H.W. Bush).” – Heh, talk is of a recession, a bad recession in part caused by a freezing of the credit markets in a manner not seen in quite some time.

The article goes on to discuss a few other fun frivolous statistics like this one:

Since 1833, the Dow Jones Industrial Average has posted an average gain of 6.7 percent in presidential election years, with 20 up years and 14 down ones.| Even if the Dow does turn around and close higher than its 13,264.82 opening level in 2008, history shows it will be an inferior gain to the year before-election year category, when the blue-chip index has gained an average of 10.6 percent and notched 32 up years.

I’m not going out on a limb when I say the chances of the Dow closing above 13,264.82 this year is nil, I think we’re looking at one of those times when we’re in the minority of all those statistics :)

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5 Responses to “Stock Market: John McCain Will Not Be President”

  1. McCain isn’t technically the incumbent, though. Does this trend also apply to the incumbent’s party?

  2. jim says:

    Sorry, that should read incumbent party.

  3. It is indeed interesting to see how people use the performance of the DJIA to predict the outcome of elections or other political events. Of course, a bad economy, in general, will cause political unrest and a strong popular desire to put someone new in office.

    I always like the stats that show the DJIA always goes up over time even after bad recessions, etc. The moral to the story being to keep your hands off what’s in the market and ride out the rough times. I’m not sure the stats include an economic disaster of this proportion. I might be wrong about that, though. I’m not exactly sure how far back these recession models go. I’m thinking 1927 which would include the Great Depression but I’m not sure.

    Great photo of McCain!

  4. shadox says:

    Well – we’re taking massive losses in the stock market, but at least Palin might not make it to the White House… I guess if that’s what it takes, I’ll bite that particular bullet…

  5. That is a splendid photo! :-D

    If there’s any question about the defunctness of the incumbent party, Alan Greenspan’s reflections, published today, about the failure of ideologically driven rampant deregulation should answer it. “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.” Uh uh. And those of us who didn’t attend that church are in a state of penury, thank you very much.

    Vote early and vote often.


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