QE Forever and Obama’s Re-election

I earlier wrote that the direction of the stock markets significantly influences the outcome of US presidential elections—where the incumbent has the edge when stock markets are on the rise.

Mitt Romney, Republican presidential candidate, lately announced that should he win the presidency this November, according to a Bloomberg article, “he wouldn’t reappoint Bernanke, raising questions about the succession more than a year before Bernanke’s term expires in January 2014.”…

In the knowledge that the Fed can tweak policies to favor the stock markets, and in the prospects that Mr. Bernanke will be out of work from a Romney presidency, then the most likely guiding incentive for Mr. Bernanke will be to work to retain his tenure by promoting the re-election of President Obama through “stock market friendly” policies in September or October.

Earlier, expectations from Bernanke’s repeated signaling of QE 3.0 prompted US stock markets to surge.

The realization of QE forever accelerated this bullish momentum where the S&P 500 has reached a milestone (December 2007) high.

As of Friday’s close, marginally off the highs, the S&P posted a substantial 16% year to date returns 

And since the announcement of the QE ‘Forever’…

…the surge in the US stock markets has now been reflected on Obama’s reelection: nearly 70% chance to win (!!!), that’s according to the prediction markets of Intrade.com 

This is one example of how policies have been used to promote the self-interests of political agents.