"If it looks like I'm going to win, the markets will be happy. If it looks like the president's going to win, the markets should not be terribly happy."
Hmmm. Are markets irrational? That's what Romney seems to imply given the facts.
The prediction market in favor of Obama's reelection has risen substantially since October 2011 (chart 1).
Meanwhile, the Dow has generally been rising over that same period (chart 2).
I don't put much credence in anyone being able to predict the Dow and there are many factors at work. Still, one could say the market's rise that is coincident with Obama's re-election probability is perfectly rational.
Since the 1960s the stock market has generally done better under Democrat administrations, whose policies try to lift all boats and expand the middle class (chart 3). It's not surprising that profits might surge if businesses have more consumers to buy their products.
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