Confirmation Bias Confirmed!

We’re a bit surprised at the response to our post, “If the is Socialism,  call me Comrade.” No, not really.  The title was a bit provocative and the comments about “Joe the Plumber” maybe should have been excluded.   We think of ourselves as pretty nonpartisan, ticket splitting,  radical centrists,  who usually, but not always, vote against incumbents.    We have voted for both Republican and Democratic Presidents.

We suggested to one college professor who offered up some excellent comments that he show the raw data/chart to his class, ask them to comment, then solicit their political parties/views and graph the results.   Filtering data with strongly held biases is a dangerous proposition in trading and investing and have sent many to the poor house.  Politics is a different story, however,  where one must “spin to win’.

We did study the impact of the stock market performance on mid-term elections back in early November, just after election day.  Click here for post.  We found the results very counter-intuitive.

Prior stock market performance does not matter in the mid-term elections for first-term Presidents since Ike.  In fact, the correlation to the number of Congressional seats won/lost by a sitting President was surprisingly negative.   We emphasize correlation and not causation.

Nevertheless,  the President’s prospects for a second-term are going to be determined largely by how the economy and job market performs over the next two years.   Traders at intrade are currently making him a 56 percent probability of being reelected.    If you think they’re wrong,  go place you’re bets.

The stock market, as measured by the S&P500, in President Clinton’s third year was up over 34 percent, which led the economic expansion and proved insurmountable for the Dole/Kemp 1996 Republican ticket.

As traders,  going into the third year of the first term of the Presidential Cycle, where the S&P500 has not had a down year since 1955 (when didn’t study early years),  we just believe the President is way oversold.  Just as President Clinton was after his mid-term spanking.  This is not our political view, it is our conclusion as analysts!

Now let’s all — Republican, Democrat, liberal, conservative, socialist, libertarian, et al — go make some money this year!   Good luck to everyone!

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