History Says a Roaring Stock Market Makes Obama Win Likely

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If the stock market continues its surprising rally, Mitt Romney may be nothing more than a rich investor after the November elections, while President Obama gets started on a second term.

That's the implication of an updated study on the effect of the stock market on presidential elections, which found a strong correlation between positive stock-market returns and the re-election of the incumbent when a sitting president is running for a second term. "Large stock market advances during the final three years of incumbent candidates' terms tend to be strongly associated with subsequent landslide victories," says the report from the Socionomics Institute, a research firm in Gainesville, Ga.

It's hardly a revelation to suggest that a rising stock market boosts the re-election odds of an incumbent president. But the Socionomics research goes a step further by comparing the stock market to other factors such as unemployment, economic growth, and inflation—which, it found, have surprisingly little influence on presidential re-election bids. "The importance of these other variables remains relatively weak or insignificant when examined in combination with the stock market," according to the study....

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