Study says if the Dow loses more than 0.5% in 6 weeks before election, incumbent presidents lose.
October 29, 2004: 1:41 PM EDT
By Jacqueline S. Gold, CNN/Money contributing writer
NEW YORK (CNN/Money) - If the historical performance of the Dow Jones industrial average is an indicator, John Kerry will be the 44th President of the United States.
Will the Dow Jones come through for Kerry?
According to a study by the Hirsch Organization, publishers of the Stock Trader's Almanac, if the Dow loses more than 0.5 percent of its value from the end of September to Election Day, then an incumbent president is going to lose his job. The Dow has lost 0.75 percent of its value over the past month.
This predictor has been true without exception every four years, from 1904 to the present, according to Jeffrey Hirsch, editor of the Stock Trader's Almanac and president of the Hirsch Organization.
On September 30th, the Dow closed at 10,080.27. It closed Thursday at 10,004.54. For President Bush to win re-election, the Dow would have to reach 10,412.92, or rise a 4.1 percent gain of 408 points, by Tuesday's close if this indicator is on the mark.
Hirsch said there is further stock market support for a Kerry victory.
His organization has studied what happens to incumbents based on stock market performance between the end of the most recent political convention -- in this year's case, after the Republican National Convention in New York -- and the election.
The market closed on September 2nd at 10,260.20, after the RNC wound down. For President Bush to overcome the odds according to this predictor, the Dow would have to gain 256 points, or surge 2.56 percent.
This post-convention indicator has been correctly predicting elections since 1900, said Hirsch. However, there have been two notable exceptions when the incumbent won in spite of the Dow's performance.
The first one occurred in 1956, when Dwight D. Eisenhower won his second term. That year, the Dow lost 2.5 percent between the end of the last convention on August 24th and Election Day.
The Soviet army rolled its tanks into Hungary that October, making the return of an incumbent who had been a five-star general in World War II particularly appealing.
The Dow was undone again in 1984, when Ronald Reagan won his second term in office. That year, the Dow lost 0.6 percent from August 24th, the day after the convention, to the election. It closed at 1,229.24 on the eve of Mr. Reagan's landslide.
"But that was just a minor correction on the heels of a huge bull market. The market's former success seemed to be more of an indicator that year," said Hirsch.
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