WITH SO MUCH financial data available for forecasting and evaluating the state of the economy, not many analysts would think to look closely at the approval ratings of United States presidents as an accurate indicator of how markets are likely to perform.
However, this is one of the things British-based Guy Monson, chief investment officer at Sarasin Chiswell, examines closely when trying to understand or predict the anomalies that affect certain financial indices.
'There is plenty of evidence to suggest that US presidential approval ratings can be linked with market activity,' said Mr Monson, who regularly appears on television for Bloomberg, BBC and CNN.
Looking at figures dating back to 1959 and comparing them with the weekly performance of the Dow Jones Industrial Average, Mr Monson discovered that stocks did better when presidents were doing poorly, and vice versa.
For example, in weeks when a president's approval rating was below 50 per cent, stocks rose at an annualised rate of 9.2 per cent. When it was between 50 and 65 per cent, the Dow rose at an annualised rate of 5.4 per cent. But when a president scored above 65 per cent - a fifth of the time - the Dow only rose 2.6 per cent on a corresponding basis.
'Data suggests that the US financial markets prefer a president to be healthy and unpopular, rather than very popular, which is when they expect negative activity,' Mr Monson said.