It was much the same for Barack Obama as he ran for re-election against Mitt Romney in 2012. Two months ahead of the election, nearly 50% of respondents in a Bloomberg survey said a win for the incumbent would be a negative for U.S. financial markets. That’s even after the S&P gained 42% from Obama’s first election to his second.
Among prognosticators who muffed the call was Donald Trump, who said in a November 2012 tweet that both the stock market and the U.S. dollar would plunge following Obama’s second victory. The S&P 500 rose almost 50% in that term, bringing his eight-year return to 112%, while Bloomberg’s dollar index gained 21% in the four years that ended in November 2016.
In the heat of an election, people let their emotions take over and exaggerate the impact a president will have on the economy and markets, according to Mark Hackett, chief of investment research at Nationwide Funds Group.
“The most nay-saying people to Barack Obama will admit that there was not a transformation of our economy in any way that they would’ve feared the day he got elected. Same thing with the Democrats with Trump. There hasn’t been this transformation that was feared,” Hackett said in an interview at Bloomberg’s New York headquarters. “Our economy is bigger than one person or one election cycle.”
Another forecasting entity that often miscalculates is the stock market itself. Shares plunged more than 5% the day after Obama was elected to his first term and the loss in the S&P 500 swelled past 3% the second time. Neither proved prescient.
Even as the evidence points to how difficult it is to nail the predictions, the prognostications are likely to continue streaming in -- and anxiety is likely to spiral heading toward Nov. 3, 2020 as the battle for the presidency heats up.
“Political risks are obviously still out there,” Jennifer Foster, co-chief investment officer of equities at Chilton Trust, said in an interview at Bloomberg’s New York headquarters. However, the election is “still a year away -- there’s still a lot of time for things to happen. Trying to take those risks and assign them to equity valuations today just feels like an exercise in futility.”
This article was provided by Bloomberg News.