Several economists who have developed surprisingly accurate economic models to predict presidential elections all agree that President Obama is in serious trouble and likely to lose in November.
Finally, after years of campaigning, debating and never-ending television coverage, the November elections are upon us. Who will win, and will it make any difference in your investments?
Yes and yes!
Will President Obama win re-election, or will Governor Romney occupy the White House in January?
Right now Intrade, the political futures market, shows Obama as the heavy favorite by 58% to 42%.
But much could change between now and Nov. 6, and Intrade has had a checkered past in its ability to predict winners.
A better record has been recorded by several economists who have developed economic models that have been surprisingly accurate.
And all of them agree: President Obama is in serious trouble and is likely to lose in November!
Here are the results of four of the best forecasters in the business:
1. Two political scientists at the University of Colorado, Ken Bickers and Michael Berry, used their economic indicator model to predict who would win in November. Their model has correctly predicted the outcome of the past eight elections, and this year they predict a big Romney victory with nearly 53% of the vote, with Romney winning almost all the swing states.
2. Nigel Gault, the chief U.S. economist at HIS Global Insights, a Boston-based research firm, uses proprietary methods and various economic variables, which show the president in even worse shape. The high unemployment rate (8.1%) is a “crucial variable,” he states, and based on his model, Obama will garner only 45.4% of the popular vote.
3. Two economists, David Rothschild of Microsoft Research and Patrick Hummel of Google, have created a model that is both political and economic, and they, too, show President Obama losing.
4. Ray C. Fair, the Yale economics professor, has developed a successful prediction model that covers elections since 1916. His model depends entirely on the strength of the economy. Right now, he has Romney leading by only one percentage point, 50.5% to Obama’s 49.5%, but he says there is a 2.5% “standard error,” so the election is “too close to call.”
What does this mean?
I am convinced that a Romney victory would be extremely positive for Wall Street, as his election bodes well for maintaining low taxes on capital gains and dividends, oil and gas stocks, and he’s viewed as more “pro-business” than President Obama.
And the best way to play a Romney victory? Buy Northern Oil & Gas (NYSE: NOG), a fast-growing energy play in the Midwest. Main Street Capital (NYSE: MAIN), a business development company is another good choice. And for Eaton Vance Floating Rate Fund (NYSE: EFT), a prime rate fund that will benefit from rising interest rates, an economic recovery will result in higher rates.
Heck, these stocks may also do well in an Obama second term.
Mark Skousen, PhD, is a contributing editor for Investment U. Read more by Mark here.