Will The Stock Market Impact The Election?

The stock market hasn’t done very well at all, and is down roughly 5% from it’s highs just in the last month with another day in the red shaping up for today (the S&P is trading around 1400, having fallen from roughly 1470 earlier this month).

I think another 4-5% before the election could be devastating to President Obama, and given how quickly we’ve shed the amount we have, a drop of that amount (or close to it) could definitely happen, especially with the way that the market has been trending down.  It only takes a few tenths of a percentage points a day to add up to a pretty big drop.

Such a large drop would be roughly a double digit drop and would signify a pretty big warning sign about the economy.  Since the stock market is forward looking (meaning the movement is largely centered upon what investors believe is going to happen down the line), this would be a very bad sign.

Plus, people don’t like to lose money and if they’ve just witnessed 10% of their 401(k) and investment savings go down the drain, this could make people pretty cranky.  Generally, when people are cranky and go out to vote, they tend to take out some of their crankiness on the incumbents.

I’ll be curious to see what the stock market does between now and the election.  So far it hasn’t shown any encouraging signs, and if the bears continue to chip away, I believe it could have an impact on the election.  If the president has any aces up his sleeve regarding the economy, he would be wise to play them.

What are your thoughts?  Could a bad October translate to a bad November day at the polls for the president?

Are We Asking The Right Question About Four Years When Looking At The Presidential Election?

One of the themes of the election has been around the question “Are you better off than you were four years ago?”  If I’m correct, I believe that this was started by Ronald Reagan when he attempted (successfully) to oust then-President Jimmy Carter from office.  In the current election, Mitt Romney has used this for the same reason, trying to oust the incumbent president from office.

Regardless of what your answer is, it occurs to me that we’re asking the wrong question.  The question you really need to be asking yourself does not pertain to the past four years, but instead on what you think will happen over the next four years.

We aren’t electing a president to lead our country for the past four years, we’re electing a president to lead for the next four years, and those are the years people should be asking about.

I think you have to look at it just as you do a mutual fund or any other type of investment where there is always a warning along the lines of:  Past Performance Is Not Indicative of Future Results.

If I were to look at answering the question as to whether I’m better off, here are some of the things I’d look at, but also how it plays into whether it would tie into a presidential vote:

  • Making roughly the same income – Worse. I think we’ve gotten one raise over the past four years.  Would a stronger economy have helped push this along?  Perhaps.
  • Welcomed two beautiful children into our world – Better. Four years ago, we just found out we were going to be parents.  Now, we have two beautiful children.  Though this changes our lives, what does it have to do with the president? Nothing.
  • Net worth – Ah, this has to tell something, right?  Well, not so fast.  Our overall net worth is higher than what it was in 2008.  Most of this is from the stock market recovering most of its losses from the big crashes that took place that fall.  But, I doubt whether the outcome would have been different had McCain been elected.  Everything else is just as it would have been otherwise as they tie into saving, spending, etc. which would have taken place no matter what.

Personally, looking at what the areas where I might judge better or worse off tells me nothing as to who I should vote for in the upcoming election.  Instead, I will spend the next few weeks looking at what I believe from each candidates rhetoric and use that as my basis for whom I cast my vote.  Unfortunately, early returns aren’t looking good for either of the two big candidates as this is probably the first presidential election since I’ve turned 18 in which both candidates seem more unqualified for the job than they do qualified.

Do you think the question of whether you’re better off than four years ago applies on Election Day?