SO GOES THE STOCK MARKET, SO GOES OBAMA?

Anyone who remembers the 2008 election remembers how important the economy and the stock market were in deciding the outcome.  It looks like a similar trend is developing in the 2012 election.

Personally, I am shocked that Obama even has a prayer in this election given the unemployment rate.  I said back in 2009 that the unemployment rate was likely to be over 8% when he was running for re-election and that that would bury his chances.  But boy was I wrong about that.  According to Intrade the President is still the odds on favorite to win the upcoming election at 58%.

But the stock market could change all of that in a heart beat.  I was struck by the chart below showing the Intrade odds of an Obama win versus the S&P 500.  In this “what have you done for me lately world” it seems that the latest stock quote is one of the primary drivers of the well-being of the country and a real-time reflection of the President’s efficacy.   Obviously, this isn’t an entirely rational view of the world and stock prices don’t always reflect our reality, but the data doesn’t lie….

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • perpetual neophyte

    Have you seen any data on how useful a predictor of actual election results Intrade has been?

  • http://www.covel.com Michael Covel

    SO GOES THE STOCK MARKET, SO GOES OBAMA.

    (just changed your question to a declaration)

  • http://www.pragcap.com Cullen Roche

    Good clarification. :-)

  • http://www.pragcap.com Cullen Roche

    No. But it’s a market, which to me, is better than a survey….A vote with your wallet is generally more reliable than a vote with your opinion. But I certainly can’t vouch for Intrade’s usefulness.

  • VII

    “Vote with your wallet”
    There was a fork in the road and I just took the LONG side-Were fully invested and I won’t sleep tonight. Not a wink-
    I’ll hold this trade probably no longer than this time tomorrow.
    Wish me luck- I’ve got a full day tomorrow and I don’t think I will hear one thing anyone says to me until this is closed out.

  • Hangemhi

    VII, are you saying you made a one day trade, or that you think you might be proven wrong in one day?

  • Larry

    @VII, I wish you good luck with your “all-in” trade. I had a bad day today. I was scrambling to sell about a third of all my risk assets all morning long, only to see that the morning’s action was a head fake, and it turned around. Mr. Market can be difficult to read at times, at least for me.

    As a chess player, I like to position my pieces so that they are playing both offensive and defensive roles, or leave a few pieces on defense while another few go on offense, most of the time. But every now and then when you have some clarity of three moves ahead, then you can go on an all out offensive blitz and pull it off. I wish you luck with it, V the Second.

  • Deadly

    I find it hard to understand given how little he has really achieved, that he has as much popularity as he does. Wonderful speaker but simply cannot lead nor implement.Sad really. Whether he stays or goes it will make little difference either way.

  • VII

    @hangemhi

    Todays action just looked like a Yugoslavian Polo match in Yugoslavia and the Referees arrived in the Yugoslavian Team Bus. My friends on the H2O Polo team have told me stories about playing in Eastern Europe.

    It just appeared synthetic in every sense. What ever Zero Hedge says about today Id actually believe. GDX at 11:00 just went parabolic- The mining stocks just ripped.. Now the futures market has the AUD higher and treasuries lower…this is good for Risk. It could all change. But today felt like the Govt. owns instinet.

    So I took a risk and went in given we were 9% off the highs I figured this market would frustrate the bears..only because the way down just appeared way to easy. I’ve never seen a hole open up like that to run through so I figure the bears need to get a little angry…a little frustrated to keep them on their feet. It doesn’t change my view of where were headed. I’m flexible but I don’t see how this doesn’t end sub 1200 very soon.

    I posted this after the market only because I didn’t want anyone following me into the abyss. I’m sweating just thinking about holding this over night. Let’s call this the Seinfeld trade. I’m doing the opposite only becuase going short just seemed so damn simple to make money. But I will post tomorrow I’m out of it.
    Yes..i’m picking up basis points in front of a steam roller.

  • VII

    yes…Thanks Larry. I need it. Let’s hope I play more like you Celtics rather than my Lakers.

  • Fabian

    Here is what’s written on the wall; stock market does well under Ben protection until elections. Obama, his boss, is re-elected. Then stock market crashes because pissed-off Republicans stop all and any stimuli initiatives. Worst outcome; Obama is re-elected and, from guilt, voters give Republicans a majority in Congress next year.

  • Roger Ingalls

    That worst case seems like the most likely scenario. Too bad a R-Congress would willingly drive the school bus into the wall to prove a point.

  • VII

    @ Hangemhi-

    I responded-this is the second one as I hit enter early-

    Todays Market action looked like a Yugoslavian Water Polo match where the Referees get off the Yugoslavian Team Bus hug the coach and say, see you at Uncles afterwards.

    It looked synthetic- There is little buying power out their based on institutions. So I took a swing at picking up some basis points – or taking up to a .00625% loss to my portfolios based on what could be a 2.5% loss which could occur. My gain could be about .0025%. Either way it’s alot to do about nothing- I have NO intention of holding this very long..unless Merkel comes out tomorrow wearing a “I love Eurobond” T-shirt.

    My view today is we end up very quickly sub 1200- But will play with some stuff on the way down. I’d like to see the SPX come up a little to start or just hide out under fixed income-(anybody notice how absent the Fed has been in this move down 10%)

    BTW- I was messing around and found a great fund for those who use MFunds- WHGIX-Been doing this along time and not sure why I never heard about this one before.
    Probably don’t want it after a BIG sell off as High Beta should do good..but if this is a long slog. Well take a look at it..we don’t own it yet. But I’ll probably build this in and get out of this cliff diving business. Not selling this fund…just thought I’d pass it along. The holdings look ok.

  • Conscience of a Conservative

    This thread bothers me, because it’s become quite apparent to me that the stock market would not have done as well as it has without fed intervention. You can say the fed is independent but I don’t buy it, the fed and treasury are very inter-connected and the Republicans and Tea-partiers have been calling for more oversight of the Fed.

  • VII

    @ Larry-

    I think it’s important to make a clarificatin between trading dicipline and something else. I don’t want to take credit for a bank shot or slopps.
    This was me moving before the Price Action told me too. Done this 3 x and I’m 1-2. I can tell you based on the futures market…

    I’m probably going to be 1-3 and this will be taken off quickly

  • Andrew P

    More to the point, the Republicans have promised not to reappoint The Bernank. Old Ben wants to stay in power, and he has some influence over the election outcome.

  • Andrew P

    Not surprising really. Just consider what fraction of the population is totally dependent on the stock market for their retirement. Moderates and Independents vote their 401K’s.

    ” In this “what have you done for me lately world” it seems that the latest stock quote is one of the primary drivers of the well-being of the country and a real-time reflection of the President’s efficacy. “

  • http://roycobden.wordpress.com/ Roy

    Agree. When Mark Twain said “If voting made any difference they wouldn’t let us do it.” he knew something…

    Obama was voted in on “Hope” he’d be better than Dubya – I doubt anyone has any of that hope left now.

  • VII

    I want everyone to write me a check for taking one for the team.
    We ve been waiting for the crash so I figured I go long to guarantee it starsts tomorrow.
    What are TPC friends for

  • http://cox.net Cee Howard

    I am very surprised that Pragmatic Capitalist would put much stock in the writer’s premise. Simply by way of contrast, Dick Morris (he was Bill Clinton’s guru, in case someone wonders) avoids registered voters and polls likely voters to find Obama losing the race for many weeks now. This president cannot win, the best evidence being recent large defections of women voters as polled by Morris. Watch as the president continues to ring any possible bell to gin up some segment of the voting public, such as the recent gay marriage thumbs up (I actually favor this myself) which will further alienate broad swaths of the voting public President Obama needs but will not carry. Of course, fundraising played a large role in this gaffe but the coffers are already overflowing. Of course there’s an explanation, but I won’t get into it.

  • Detroit Dan

    As others have noted above, there is a real danger that whomever loses (and I certainly hope and expect that it will be the insane neo-Fascist Republicans) will tank the stock market following the election…

  • Huckleberry

    “Anyone who remembers the 2008 election remembers how important the economy and the stock market were in deciding the outcome.”

    Evidence, please?

    I remember the 2008 election, and as I recall, nearly everyone had made their minds up over issues such as Iraq, Republican performance over Katraina and so on.

  • Erik V

    Let’s not forget one thing: most of the data in that chart was before Romney had wrapped up the nomination. Back when it looked like a bafoon may win the GOP nomination, of course Obama’s odds were higher. Now, Romney is the favorite, if as mentioned above you look at polls only of likely voters and make the assumption based on empirical data that a majority of undecideds go for the challenger. And as we know from sports betting etc., the market is usually wrong.

  • Silalus

    I can’t figure out why anyone likes Coke better than Pepsi either. Or vice versa- yet people have really strong opinions in both directions. It’s all really just the power of brand marketing and market segmentation.

  • Andrew P

    I listen to Dick Morris all the time. He makes a good argument for Obama losing, based on current poll data, and I hope he is right. But I also remember how wrong Morris has been so many times. Morris talks his book, as he is in business to make money. Poll data can change in a heartbeat, and the real campaign hasn’t even started yet. The true deciders of the election – Moderates and Independents – aren’t paying attention yet. A lot can change between now and election day.

    And I do remember 2008. McCain was actually ahead until Lehman failed. Moderates and Independents mostly vote their own financial prospects as they see them. Other issues are of secondary or tertiary importance, but can work at the margins and help drive turnout. Obama’s transparent efforts to “gin up the base” are really about fundraising at this stage in the game. That will all be forgotten by November.

    Remember, the Republicans have PROMISED not to reappoint Bernanke. The Bernank wants to stay in power. In my view, he is Obama’s biggest asset.

  • http://moodmovesmarkets.blogspot.com/ David

    Nice to see this from CR. I’ve been blogging about these kind of relationships for years.

    I even suspect that a failed Wisconsin recall against Walker is a longer-term positive for Obama – even though the leftwing despair and gnashing of teeth in the immediate aftermath of a Walker win will make it seem otherwise.