Indicators of U.S. Presidential Re-election Results

What economic/financial variables are most useful in predicting re-election prospects for incumbent U.S. presidents? In the November 2012 revision of their paper entitled “Social Mood, Stock Market Performance and U.S. Presidential Elections: A Socionomic Perspective on Voting Results”, Robert Prechter, Deepak Goel, Wayne Parker and Matt Lampert analyze relationships between prior U.S. economic and equity market performance and incumbent performance in relevant U.S. presidential elections. They focus on incumbent national popular vote margin, but also consider for validation: percentage of total popular vote, percentage of total electoral vote, electoral vote margin and election wins/losses. They estimate annual U.S. stock market returns from November through October based on a modeled Dow Jones Industrial Average (DJIA) starting 1789 dovetailed with actual DJIA returns starting 1897. They look at Gross Domestic Product (GDP), inflation (producer price index, PPI) and unemployment as key economic performance measures. Using specified DJIA, economic data as available and election results during 1824 (first availability of popular vote results) through 2008, they find that: (more…)