To observers, each United States Presidential election can seem like a unique and unprecedented event. It takes a larger than life personality and an incredible amount of drive to win a party’s nomination and campaign for temporary ownership of the White House, so each election tends to bring plenty of surprises and memorable moments. On the other hand, there are enough commonalities among the elections that history has already given the country that many historians and others feel comfortable making some generalizations. Interestingly to investors, many of these are of economic sorts, with a range of financial factors tending to predict us presidential election results to a surprising degree.
The overall unemployment rate, for example, is typically a pretty reliable harbinger of change in the White House. When that rate stands much above 5.5%, a switch between parties in the White House is typically in the offing, with nothing but extremely high approval rates being able to counter this, in general. Whether the White House holds a Democrat or a Republican at the time, people feeling the pressure of a soft employment market tend to look for another alternative when Presidential election time rolls around.
Even though the popular vote, as filtered through the Electoral College, is what ultimately determines who wins the Presidency, there are factors of a more abstract sort that stand out, too. The trailing inflation rate average tends to be surprisingly influential when compared to the emphasis that economists place on it, as do a number of composite interest rate measures. Even while these factors do not translate as directly into the financial experiences of average Americans as unemployment does, their effects are felt sharply enough that voters seem to take them into account when they go to cast their ballots.
Because a Presidential election invariably affects the markets in various ways, investors are often keen to understand these possibilities and others. Many investors also seek to incorporate their knowledge of various developments of other kinds into their calculations, too. An ongoing war, for example, is often good news for an incumbent President, as well as for their party while it still rages. Understanding these things can give investors an advantage as they plot out their own strategies.