You don’t need presidential debates – the one graph version

Tonight is the night – Obama vs Romney in the second presidential debate. I am in Europe so I do not plan to stay up all night and watch it. But in fact you don’t need to follow presidential debates to have something clever to say about the outcome on election day. All you need is to look at the US stock market and my forecast is that if S&P500 keeps trending upward until election day then Obama will be re-elected. If we get a major sell-off then Romney will soon move into the White House.

Just see this graph – it is S&P500 and Obama’s reelection likelihood mentioned from InTrade shares on “Barack Obama to be re-elected President in 2012″.

This is the real-time version of James Carville’s famous dictum “It’s the economy stupid”. It is not a forecast on the election outcome – as I have no clue where the stock market is going in the coming weeks, but it is an illustration that TV debates are much less important than how the economy is doing.

Enjoy the debate anyway…

Related posts:
Bernanke, Obama and the political business cycle – and some research ideas
Will Draghi’s LTRO get Obama reelected?

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8 Comments

  1. CJ

     /  October 16, 2012

    I believe there’s another debate on the 22nd.

    Reply
  2. I’m not sure Lars. I think that this graph shows that, while the economy is a huge factor, the theater element is just as important. Look at the massive drop in Obama’s odds after the first debate (which I thought was a draw!), this was a clear break with the earlier pattern. I think this is a multivariate function, only the ‘non economy’ variables weren’t talking much until the last debate.

    Reply
    • JP, clearly other factors are important, but in my view the economic situation will dominate everything else – the only real exception is war. American voters do not like to see a lot of bodybags returning from foreign wars.

      The spike for Obama’s reelection chances is hard to explain – my guess would be it was a combination of Romney’s 47% remarks and a genuine improvement in the US economy – particularly in the labour market situation and consumer confidence.

      Reply
  3. Becky Hargrove

     /  October 17, 2012

    Once again I could only stay in the room for about five minutes but can still hear the debate. Without watching, Romney has a calm reassuring voice while Obama sounds a bit defensive..psychologically the two of them together almost the opposite of the lead up to the first debate.

    Reply
  4. The market is up, unemployment is down and housing prices are starting to rise. Things look good for Obama.

    Reply
  5. Is the S&P driving Obama’s election chances or are Obama’s election chances driving the S&P?

    Reply
  1. Do platforms really matter in elections | Rational E.T.

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