Can the stock market predict who wins the White House? Or, put another way, can the market predict who will not win the land's highest office?
The link between markets and politics isn't obvious to most people. But once you see it for what it is, it's the first thing you look for.
That link is what Bob Prechter had in mind in the November 2004 Elliott Wave Theorist, when he said then-President George W. Bush would suffer a popularity reversal that was
"very like Nixon’s second term but worse: a bigger slide in the stock market, a drop to lower levels of popularity…. The downhill course of this presidency will pave the way for the Democratic candidate (probably Hillary Clinton) to become president in 2008."
It's remarkable how events unfolded in line with a forecast that was made years in advance.
The stock market did slide in 2007-2008, Bush's popularity did fall as low as 19 percent (lower than Nixon's), and the Democratic candidate did win in 2008.
Here's the larger point: Robert Prechter had a method for making that forecast -- and that method can be similarly applied to future elections (and other societal events).
Let's return to reviewing past analysis for the purpose of shedding some light on what may unfold in the future.
A president's achievements in office do influence public perception, but the evidence points to an even more "influential influence." Consider the example of President John Kennedy, as explained in the landmark book, The Wave Principle of Human Social Behavior (p. 273):
"President John Kennedy blew the only military conflict in which he engaged the country, attacked the steel industry out of pique to no result, and continually committed adultery. He is revered. Why? Because the country was in a state of euphoria for all but a few months of his term..."
In other words: the country's collective mood drives public opinion and even the legacies of U.S. presidents.
In fact, the influence of social mood is strong enough to eclipse more than a president's achievements -- it can even overshadow his character. Martin Van Buren was known as "amiable," Herbert Hoover had great executive skills, and Jimmy Carter was described as a "good man." Even so, negative social mood -- as reflected in a bear market trend -- led to reproach for all three men, while they were in office and in the history books. Here's another passage from The Wave Principle of Human Social Behavior (p. 274):
"Near lows of major bear markets, incumbent presidents have suffered their greatest defeats...Martin Van Buren was ousted by a landslide in 1840 near [a] low; Herbert Hoover was ousted by a landslide in 1932 at [a] low, Jimmy Carter was ousted by a landslide in 1980 near [a] low..."
Regardless of how much money the candidates raise, no matter how good the advice of their consultants, however smooth their speeches on the campaign trail -- social mood will be the overriding influence in the 2012 presidential election.
In the new Elliott Wave Theorist, Robert Prechter updates his Parallel Cycles of Presidential Experience, and tells you what those cycles suggest about the 2012 presidential election (and the market).
Plus, the June Theorist gives you a critical update on what's happening in the markets now. It's compelling analysis and commentary from a 30-year market veteran that you simply won't find elsewhere.