Magazine article Newsweek

The Stock Market and the Election

Magazine article Newsweek

The Stock Market and the Election

Article excerpt

The sinking stock market could be forecasting the results of the November presidential election-- or vice versa. Stocks will behave differently after Nov. 4, depending on who wins. TIP SHEET'S Linda Stern asked Jeffrey Hirsch, editor of the Stock Trader's Almanac, to read the tea leaves.

STERN: What does the year-to-date performance of the stock market predict about the election's outcome?

HIRSCH: This is a stock market that was in trouble, even before last week's sell-offs, and the malaise we've been experiencing makes the ouster of the incumbent party more likely. Strong Septembers and Octobers usually lead to an incumbent-party win. You would think despite the closeness of the polls that we still are going to see Democrats retake the White House.

Given all that you know about election-year patterns, how would you expect stocks to perform through the election and for the rest of the year?

Election years are traditionally up years. Incumbent administrations shamelessly attempt to massage the economy so voters will keep them in power. But sometimes overpowering events occur and the market crumbles, as it did last week. The bailing-out was too little, too late, and I think we're going to continue to have market weakness through October. Once we have the settlement on the election, the market would be more inclined to be happy.

How do you expect stocks to respond to an Obama victory and a McCain victory?

The initial response from an emotional standpoint would be positive for an Obama victory and negative for a McCain victory. …

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