In our July post, Presidential Approval Ratings and Stock Market Returns we argued that stock market returns have little causal relationship with the popularity ratings of the incumbent President.
We said ``popularity measures seem to be an inaccurate way to evaluate, gauge or predict stockmarket activities, trends or returns. That's because popularity is mostly about superficiality and inherently fickle."
In contrast to certain analysts who say that Presidential approval has important contributions in determining spending and investment choices which gets filtered into the stock market valuations, it would seem to us that the attribution of a causal link, instead, represent as a heuristic or cognitive bias known as "clustering illusions" or the tendency to see patterns where none exists (wikipedia.org).
Gallup's recent article seems to validate our thesis.
Some of the presidential approval-stock market performance correlationship charts per administration during the last two decades...
We said ``popularity measures seem to be an inaccurate way to evaluate, gauge or predict stockmarket activities, trends or returns. That's because popularity is mostly about superficiality and inherently fickle."
In contrast to certain analysts who say that Presidential approval has important contributions in determining spending and investment choices which gets filtered into the stock market valuations, it would seem to us that the attribution of a causal link, instead, represent as a heuristic or cognitive bias known as "clustering illusions" or the tendency to see patterns where none exists (wikipedia.org).
Gallup's recent article seems to validate our thesis.
Some of the presidential approval-stock market performance correlationship charts per administration during the last two decades...
Barack Obama
George Bush Jr.
Bill Clinton
George Bush Sr.
Ronald Reagan
Jimmy Carter
In conclusion, the Gallup says, (all bold highlights mine)
``In any case, Gallup trends suggest no systematic pattern by which Democratic presidents (who may be viewed on Wall Street as more anti-business than Republicans) find their job approval ratings inversely related to job approval, nor a consistent pattern by which Republican presidents find a positive correlation.
``More generally, from president to president, and from time period to time period within presidencies, the market and job approval ratings have moved in widely varying directions, displaying no systematic relationship."
It's the policies employed that should matter more than simple popularity.
