They still call today Super Tuesday, but the polls argue the GOP nominee will be little more than cannon fodder for President Obama in the general election. With Obama running at 60% on the widely followed intrade.com market, the question for Robert Prechter, founder and president of Elliott Wave International, is whether or not there's anything that can stop the President's re-election bid.
Prechter says it's all about the stock market. His firm has run studies dating back as far as 200 years, looking for connections between an incumbent's chances and markets, GDP, employment, and inflation. The studies show that stocks are by far the "most predictive" of an election outcome.
Stocks would logically be secondary to the other measures. High levels of individual investment in stocks is a relatively new phenomenon while the underlying economic health of the country impacts citizens every day. Even Prechter admits his results are "counter-intuitive." His theory on why stocks and voting would be so tightly linked is that people aren't any more rational with their voting than they are when they buy stocks.
"We think most of the swing voters are moving on their feelings; in other words the social mood and whether it's positive or negative," says Prechter. "For example, the last three years the social mood is increasingly positive. People have been buying stocks, we've seen a pick-up in the economy... that's translated into positive feelings about the leader which is President Obama."
Prechter says the best "tell" is market levels at the time of the election compared to where they were three years prior, not over the full term of the Presidency. The populous tends to blame the prior leader for the first year, but holds the balance of the term on the Commander in Chief.
See the video for various relationships Prechter found between economic figures, markets and elections. Here's what you need to know:
The 2012 Election will be held on November 6.
S&P close on November 6, 2009: 1070
S&P close yesterday: 1,364 (27% gain)
Drop required to bring stocks back to flat by election day: 22%.
Whoever the GOP nominee turns out to be, he may want to look into selling way in the money November S&P calls as a hedge.