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Mar.27

12:30 PM ET

Thursday, 27 Mar 2008

Presidential Candidates and the Economy

Posted By:Gina Francolla

Senators Obama and Clinton are all about the economy today. The battle between the two Democratic candidates has heated up in the last weeks with issues on race and Obama's former pastor and Clinton's incorrect recollection of Bosnia sniper fire, but today the candidates focus on our sweet spot, the economy.
Obama has criticized Republican candidate John McCain on his views on the economy as hands off, and that "He said the best way for us to address the fact that millions of Americans are losing their homes is to just sit back and watch it happen."
-Obama's remarks are in reference to McCain's speech on Tuesday where he stated that government assistance to homeowners should be temporary and that the government should not bail out banks or borrowers who act irresponsibly.
Obama today called for a new $30B stimulus package to deal with the mortgage crisis, and Clinton has proposed a $30B relief package to ease the housing and credit crises. Obama speaks to Maria Bartiromo today on CNBC, and gave an economic speech at Cooper Union in New York City.

Does market performance or overall economic perception influence Presidential elections? In the 27 Presidential elections since the inception of the Dow (1896), Republicans have been elected 15 times, Democrats 12 times. We isolated the performance prior to and after Republican and Democratic administrations, and did not find a significant difference 1-year prior to the election, or the year after the election/first term. However, when economic and social issues dominated as with the Depression, Prohibition and war, in the below case World War I or Vietnam, the Oval office did switch parties.
-87% of the times Republicans were elected, the Dow was up in the 12 months prior to the election, 75% of the times up over 5%
-75% of the times Democrats were elected, the Dow was up in the 12 months prior to the election, 67% of the times up over 5%
-The oval office switched parties 10 times, only three times with a negative Dow in the preceding 12 months:
*In 1920, the Dow was down 28% for the 12 months going into the election when Republican Warren Harding was elected (Beginning of Prohibition) his predecessor was Democrat Woodrow Wilson
*In 1932, the Dow was down 43% for the 12 months going into the election when Democrat FDR was elected (the Great Depression), his predecessor was Republican Herbert Hoover
*In 1960, the Dow was down 8% for the 12 months going into the election when Democrat JFK was elected, his predecessor was Republican Dwight Eisenhower
*The Dow & S&P 500 have been positive for the 12 months leading up to every election since 1960, the NASDAQ has been positive since 1984 regardless of whether the executive branch was GOP or DEM.

How are the Intrade markets at www.intrade.com responding to the economic plans of Obama and Clinton, as well their increasingly combative campaigns?
The Intrade contract for Obama to be the Democratic nominee [OBAMA08 Loading... ()] is currently at an 80% probability that he will receive the nod, and Clinton's Intrade contract [CLINTON08 Loading... ()] is currently showing a 19.8% probability that she will be the Democratic nominee.
-The NBC/WSJ poll show Clinton's positive rating at a new low of 37%, and Obama also saw a slight dip in his positive rating dropping to 49% from 51%.

Will Obama and Clinton's bitter turn help McCain and the Republicans?
-The Intrade contracts for who will be the next President currently show Obama [OBAMA.P Loading... ()] with a slight lead over McCain at a 47.9% probability of winning the Presidential election vs. a 39.5% probability for McCain [MCCAIN.P Loading... ()] to be the next President. Hillary Clinton [CLINTON.P Loading... ()] is currently a distant third at only a 13.8% probability of becoming the next President, according to the Intrade markets.

The Intrade contracts for the political party to win the White House in 2008 show the Democratic Party [DEM08.P Loading... ()] in the lead with a 59.20% probability of winning the election, but show some erosion due to the latest Clinton - Obama battles, and the Republicans [REP08.P Loading... ()] have gained trading at a 40.80% probability that the GOP will remain in the White House.