Saturday, October 11, 2008

Bouquet to: U.S. Stock Market for Predicting Obama Election Win

Here I'm going out on the limb a bit. My hypothesis: the U.S. stock market's dramatic fall over the past couple of weeks is capitulation. Not capitulation from the perspective of financial results; but capitulation over the U.S. presidential election. It is a capitulation that Barack Obama will beat John McCain.

Here's the basis for the hypothesis: For much of the past 12 months, the market has inversely reflected Obama's performance in the election poll results. This predates the serious concern over the U.S. financial bail-out. If this is correct, then the absolute blow-out of the market over the last few weeks represents capitulation on the election - as Obama's lead over McCain moves to virtually unassailable levels.

So, here's the backup for the hypothesis. Consider two charts. The first one is national average polling data from Real Clear Politics :

And the second chart we'll be referring to is a chart of the Dow Jones Industrial Average for the past 12 months from BigCharts:

What can you see from these? Well, notice that Obama's interim high over McCain in the polls came around March 10, 2008. That corresponds with the Dow's retest of its lows at almost the exact same date.

Then, by April 5, Obama hit an interim low; the Dow an interim high.

Then, Obama's poll results began a steady three-month march up to a high on July 6; the Dow took a corresponding steady march down to a low around July 8.

Obama then began slipping dramatically until August 20; meanwhile, the Dow recovered, hitting a high in the second week of August.

There was some bouncing around until the first week of September. From that point through today (mid-October), the trend has been runaway gains for Obama; and corresponding runaway losses for the Dow. Indeed, during this one month period, Obama's favorability results catapulted from 44.7 (close to his all time low) to 49.9 (his highest ever). During the same time, the Dow collapsed in one of its steepest dives in history, from 11,750 to under 8,000.

So, my point? Consider that the stock market is not telling us that the financial crisis is about to engulf us all. It may instead be simply telling us that John McCain is simply about to lose the U.S. presidential election to Barack Obama.

1 comment:

  1. I don't think you have a causal relationship. When the economy goes bad, Obama's polls go up because he is a democrat. Republicans do better in wartime. Democrats do better in bad economic times.