If you want to predict the next presidential election, it may be as simple as looking at the stock market come election time. That's the conclusion of a new study conducted by a finance expert from Rice University, which specifically examined the voting trends of those who hold stocks. The research finds that when the stock market is doing well, stockholders tend to vote for the incumbent in presidential elections. The authors don't claim that the market directly determines elections, but that it can be a predictor of how specific voting blocs and swing states will go.
This phenomenon is nothing new, according to political strategist Matt Langston with Big Dog Strategies. "Where the economy is directly relates to any sort of political motivation that voters have at the ballot box," he says. "It is the American capitalist system that influences who we're going to keep as a president."
While positive stock trends can help incumbents, the opposite is also true. "When you look at times when we've had a recession or economic downturn, most of those are one-term presidents," says Langston. Indeed, the two most recent one-term presidents, Jimmy Carter and George H.W. Bush, were both hurt by poor economies in their re-election years. When attacking Bush in 1992, Democratic political operative James Carville uttered the famous phrase, "It's the economy, stupid."
The current stock market trend would favor President Trump right now, as the markets are hovering near a record-high. But there is still a year before Election Day, so that trend could change.
Either way, the market will be a factor in next year's election. "Republican or Democrat, if things are going great on Wall Street, it is a great pathway and a lesson to look at, as far as who will be the next president," says Langston.