The chart above displays the S&P 500 Index and Intrade odds for Obama to be re-elected, on a daily basis back to December 2010. The two series have moved pretty closely together over the last 18 months, with a correlation coefficient of 0.78.
Business Insider featured a similar graph as its Chart of the Day on Monday (ht/Craig Newmark), and also linked to this article about the relationship between the stock market and presidential elections, featuring Sam Stovall, chief investment strategist for Standard & Poor's Equity Research Services, who wrote this in a recent S&P newsletter:
"The S&P 500's price performance during the three calendar months leading up to the presidential election has been a good predictor of whether the president or his party would be re-elected or replaced. An S&P 500 price rise from July 31 through October 31 traditionally has predicted the reelection of the incumbent person or party, while a price decline during this period has pointed to a replacement. Since 1948, this election-prognostication technique did an excellent job, in our view, recording an 88% accuracy rate in predicting the re-election of the party in power (it failed in 1968).
Business Insider featured a similar graph as its Chart of the Day on Monday (ht/Craig Newmark), and also linked to this article about the relationship between the stock market and presidential elections, featuring Sam Stovall, chief investment strategist for Standard & Poor's Equity Research Services, who wrote this in a recent S&P newsletter:
"The S&P 500's price performance during the three calendar months leading up to the presidential election has been a good predictor of whether the president or his party would be re-elected or replaced. An S&P 500 price rise from July 31 through October 31 traditionally has predicted the reelection of the incumbent person or party, while a price decline during this period has pointed to a replacement. Since 1948, this election-prognostication technique did an excellent job, in our view, recording an 88% accuracy rate in predicting the re-election of the party in power (it failed in 1968).
What's more, it recorded an 86% accuracy rate of identifying when the party in power would be replaced (it failed in 1956). Therefore, pay attention to the market's performance in the three months leading up to the presidential election, as it will probably do a better job than the plethora of political pundits prognosticating on the presidency."
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