And the Winner of the 2012 Presidential Election is?

President Obama is likely to win in his re-election bid for the following two reasons:

1. Robert Prechter, who writes “The Elliott Wave Theorist,” has done extensive research on those factors that influence re-election outcomes of presidential races. His hypothesis is that changes in social mood simultaneously regulate significant changes in the stock market and people’s opinion about their political leader.  (Social mood is manifested in high stock market valuations, low dividend payouts, low interest rates, low mutual fund cash positions, and high favorability readings of the President.) Therefore, his research revealed that the stock market is an “excellent indicator” of re-election outcomes.  Also, the so-called wealth-effect of voters matters less than voters’ mood when it comes to re-election outcomes.  In addition, GDP had a moderately positive relationship to re-election results; and inflation and unemployment rates had “no” significant predictive value.  He tested stock-market performance 1, 2, 3, and 4 years prior to elections and found all of them to be significant.  However, the 3-year time horizon leading up to the re-election was the most significant.  So, we do stand based on the 3-year time horizon?  Given the 3-year time frame, the DJIA has gained 36%, which definitely bodes well for President Obama.  Even though the economy remains weak, the 3-year positive trend in how people feel, as measured by the performance of the DJIA, definitely gives the edge to President Obama.  
2. The following three-year S&P 500 chart depicts one of my long-standing indicators that I use to identify “market trends.”  When the 15-week Exponential Moving Average (EMA) exceeds the 40-week Exponential Moving Average (EMA), the “primary trend” is up.  Likewise, when the 15-week EMA < 40-week EMA, the “primary trend” is down.  As depicted, this indicator bodes well for the re-election of President Obama, unless the market tanks over the next two months.

 

Underlying social mood as manifested in the stock market remains positive going into the November election.  Therefore, the probability of President Obama being re-elected is high!

So, how can one use the above information against the backdrop that the next four years will usher in the largest economic/financial disaster known to man with the DJIA selling for 1,000?  (Yes, the coming economic downturn will be greater than the Great Depression of the 1930s.)  Given the scenario, I don’t consider who ever occupies the White House will win any popular contests.  Remember that over the next four years the expected social mood of this country will change from positive to very “bleak.”  Therefore, the man that occupies the Presidency will undoubtedly be highly despised.  In other words, the proverbial bottom-line is to vote for the candidate you like the least.