What if Obama’s Bounce is Stock Market Related?

Stanford PhD candidate in Political Science Lucas Puente tweeted the below graph out just now.  The left Y-axis is the S&P 500 and the right Y-axis is the Intrade % chance Obama gets re-elected.  Superimposed in the graph are the two major events where central bankers (the US Federal Reserve and the European Central Bank) pumped liquidity into the market.  Basically the major US and European Central Banks are artificially inflating the asset prices in securities markets like the S&P 500.  Although they are doing this to ease credit crunches globally and hopefully stimulate economic growth it has the “coincidental” benefit of creating a “wealth effect” among US voters whose 401ks and investments are seeing a precipitous rise in value thanks to these central bank actions.  Suddenly pocketbook issues don’t weight as heavily on American’s minds as they did a month ago and voters view on Obama’s handling on the economy improves along with it?   Hmmmmmmm

But what happens when the Fed and ECB deck of cards comes crashing down?  Barry better hope QE keeps the other shoe from dropping before election day…

One Comment

  1. ed
    Posted September 26, 2012 at 8:24 am | Permalink | Reply

    The morning Jay post today mirrors what you have been saying all along. It also adds another dimension called party “base” control. In sum, advantage GOP right now…

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