Barack Obama will likely win re-election in November.
I’m no political analyst or expert. I don’t carry ties to any politician. I can’t name every president nor list each U.S. Constitutional Amendment.
When it comes to politics, I’m about as unqualified as they come.
Nevertheless, I can tell you – with 90% confidence – that Barack Obama will win in November.
I can tell you this with such a high degree of assurance not because of my political experience, but because I follow the stock market.
The stock market has reliably picked the winner of nearly every presidential election.
Let me explain …
I am not alone in this claim. InvesTech Research confirms that over the past 100 years, stock market direction is the most accurate indicator of who will win the presidency.
InvesTech discovered that if the stock market shows gains in the two months before the election, the incumbent was re-elected 15 of 16 times. Conversely, when the stock market declined during that time, the opposition won 10 of 12 times.
The stock market accurately predicted the next president 25 of 28 times (89.2%).
For some this is quite the riddle. How can the stock market be so omniscient?
With some careful thought, it makes sense. Most political junkies agree that the economy plays a key role in deciding the presidency, but other factors are also involved.
The stock market is (and should be) an accurate measure of the current economy and future economic developments. But the stock market also takes many other factors into account, such as consumer confidence, tax policies, energy prices, employment etc.
In many ways the stock market is an accurate representation of the overall health of a country. And if the country is flourishing, stocks go higher and people will go with the incumbent. When the country is floundering, stocks head lower and the opposition takes over.
Though the stock market has been jumpy over the past several years, the overall direction has been higher. Furthermore, most indices have recovered over the past month as tensions in Europe eased.
The long-term and short-term direction favors higher prices, indicating a positive bias for Obama.
The election is 2-1/2 months away. And as InvesTech noted, it’s the final two months that matter. War breaking out or a default in Europe could easily shift stocks. But right now, the odds favor the bulls (who also have Ben Bernanke in their corner).
Mitt Romney and Paul Ryan are locked in a heated race to unseat the president and VP. They may also have to fight the tape as well.