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Can the Stock Market predict the next President?

3rd Party Interview with Renewable and Solar Energy Perspectives Contributor, J. Peter Lynch

By Peter Lynch
Exclusively for InvestorIdeas.com
November 03, 2008

Q:  Mr. Lynch.  I read an article in a magazine that mentioned that the action of the stock market was a potential predictor of Presidential Elections. Considering that the election is a few days away, do you have any insight into this?  Bryan W.  New York

A:  Bryan I am familiar with this and over the years I have read a number of books and articles talking about this very topic.  As a result of your question, I did a little research and found a very interesting article in which the author back tested this thesis (from 1900 to 2004) and found that it predicted with an 89% degree of accuracy who will win the next Presidential election.

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It appears that there is a strong correlation (89%) between the stock market’s performance in the two months immediately preceding the election and who will win the Presidency.

Basically if the Dow Jones Industrial Average LOSES ground in the two months prior to the election the incumbent party will lose the election.

If the Down Jones Industrial Average GAINS ground in the two months prior to the election the incumbent party will win the election.

What does this mean in terms of numbers and levels for the current Presidential Election?

If the Down Jones closes ABOVE 11,188.23 at the close on November 4th – McCain will be the next President.

If the Down Jones closes BELOW 11,188.23 at the close on November 4th – Obama will be the next President.

The Dow Jones closed at 9325.01 on Friday 10-31-2008

As a result, given that the Dow Jones would have to add 1,863.22 points, or 19.98%% over the next TWO (2) trading days it appears that the next President of the United States will be Senator Barrack Obama with an 89% degree of certainty based upon this historical correlation.

If this correlation holds true it is certainly a very positive development for the solar industry.

Renewable and Solar Energy Perspectives with J. Peter Lynch at Investorideas.com http://www.renewableenergystocks.com/PL/

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J. Peter Lynch has worked, for 31 years as a Wall Street analyst, an independent equity analyst and private investor, and a merchant banker to small emerging technology companies. He has been actively involved in following developments in the renewable energy sector since 1977and is regarded as an expert in this area. He is currently a financial and technology consultant to a number of companies. He can be reached via e-mail at Solarjpl@aol.com.

Disclaimer: The views and opinions expressed in the research published are those of the individual companies and writers and not necessarily those of Investorideas.com®, or any of the industry sector portals . At the time of publication, writers may hold positions in the stocks or companies mentioned.

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