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It Will Always Be About The Economy!



May 02, 2012 – Comments (0) | RELATED TICKERS: SPY , QQQ , DIA

Now that it seems to be Obama v. Romney 2012, it is worth pointing out some key economic measures that will be indicators of who will win.

At election time in 2008, the unemployment rate was 6.6% with an annualized inflation rate of 3.6%; giving us a misery index of 10.2%.  Ironcially, that was above the brightline of 10% that my political scientist father noted as a key stat indicating that the controlling party would be in trouble.  It turned out to be true.  Currently, the unemployment rate is 8.2% with an annualized inflation rate of 1.4%; thus giving us a misery index of 9.6%.  Measuring with a lagging and a current economic indicator, the misery index seems to have "glass half full" impression.  For certain, things did not get worse under Mr. Obama.

As for a future indicator, there is a clear trend.  The S&P 500 is up an annualized 11.15% since November 2008, and when one compares this to the 4 year annualized return of -6.8% (November 2004-November 2008), this shows a complete turnaround in our economic path.

While it appears that the past few years and current events indicate that we are trudging through a long slog, the market pros seem to feel that there is better feeling of things to come in the next 12 months.  Given the advantages Obama has as a sitting president, I put the probability of an Obama victory in November between 80.3%-89.2%.  (The formula is private).  This formula also accounts for standard errors.

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