Social Mood, Stock Market Performance, and U.S. Presidential Elections

Abstract

We analyze all U.S. presidential election bids. We find a positive, significant relationship between the incumbent’s vote margin and the prior net percentage change in the stock market. This relationship does not extend to the incumbent’s party when the incumbent does not run for reelection. We find no significant relationships between the incumbent’s vote margin and inflation or unemployment. Gross domestic product (GDP) is a significant predictor of the incumbent’s popular vote margin in simple regression but is rendered insignificant when combined with the stock market in multiple regression. Hypotheses of economic voting fail to account for the findings. The results are consistent with socionomic voting theory, which includes the hypotheses that (a) social mood as reflected by the stock market is a more powerful regulator of reelection outcomes than economic variables such as GDP, inflation, and unemployment; and (b) voters unconsciously credit or blame the leader for their mood.