We’ve examined this before, but here’s another great article examining just how tightly interwoven Obama’s success and the market’s failure is:
AS if the announcement this week that actor Josh Brolin will play an evil short seller in the sequel to the movie “Wall Street” wasn’t enough of a contrarian signal to go long on stocks, what about this?
History shows that when the approval rating for a US president dips below the magical 50 percent mark, it is also typically the time to buy.
Let the Obama rally begin!
Of course, the rally began back in March when the president’s poll numbers had virtually nowhere to go but down. Now, with a summer of discontent over health care reform and the state of the economy, President Barack Obama‘ s approval ratings are plunging fast — in the low 50s in most polls — and stock prices are surging.
This comes as no surprise to market historians who know that poor presidential approval ratings make for strong stock- market profits.
According to research from the folks at Ned Davis dating all the way back to 1959, stocks do better when the public thinks the man in the White House is doing worse.
In fact, in weeks when the presidential approval rating sagged below 50 percent, stocks rose at an annual rate of 9 percent — versus only 2 ½ percent when the president in office sported a wildly popular 65 percent approval rating in the polls.
Americans witnessed this phenomenon firsthand on Inauguration Day; despite the national excitement about an Obama presidency and an approval rating near 70 percent, the Dow plunged 332 points.
The correlation is stark, and there may be two reasons behind the relationship. First of all, poll numbers are a lagging indicator of voter sentiment.
By the time a president starts to get blamed for a bad economy and high unemployment, the worst may be over, and the stock market begins to sense this.
Furthermore, falling approval ratings can hamstring an ambitious chief executive bent on expanding the role of government — a scenario that Wall Street often applauds and which appears to be happening right now.
Not surprisingly, investors don’t want their presidents to be too unpopular. As we’re all painfully aware, stocks plunged during President Bush’s final year on the job, as his approval rating hovered around 30 percent. History shows that when presidential satisfaction dips below 38 percent, stocks tend to fall — 2 percent on average on an annual basis.
So while President Obama may rue the fact that barely half of American voters now approve of his performance, for investors news that the Obama love-fest appears to be over may turn out to be a good thing.
There’s my two cents.