, Salem, MA


October 3, 2012

Economy takes center stage


Since the start of the year, the LPL poll has shown a steady upward trend for Democrat-linked stocks, which favors the status quo — that Democrats will keep their hold on the White House and the Senate. Republican-leaning stocks seemed to do OK until the end of May, Caruso said, but lately there has been a momentum shift in favor of Democrat-leaning sectors.

Historically, if the incumbent wins, it’s good for the stock market because it provides stability, Caruso said. The market also tends to run in cycles, falling during a president’s first and second years in office, but turning around by a president’s fourth year.

The market also favors a Democratic president and a Republican Congress, on the theory that such a stalemate would not mean a lot of regulation thrown at business.

“The market just wants the market to go up,” Caruso said. “It doesn’t matter who is in office.”

Kenneth Ardon

Associate professor of economics

Salem State University

Kenneth Ardon points to computer models that economists use to take a macroeconomic approach to predicting elections; some models even give a state-by-state look. Some models tend to favor a Romney victory.

Since the 1960s, Ardon said, “you can predict the winner most of the time based on what the economy is doing.”

By some measures, he said, Romney should be ahead.

“I think early on Mitt Romney certainly tried to make it about the economy and to get people to blame Obama, and that could be his selling point,” Ardon said.

It’s not so much where things stand in the economy, he said, but “which direction it is going.” Three things play into this: gross domestic product, unemployment and inflation, with the latter being a non-factor in recent years.

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