By Keith Fitz-Gerald
Money Morning/The Money Map Report
No question, President George Bush's approval ratings have pulled an "Enron."
A recent Associated Press-Ipsos poll conducted June 12-16 showed only 29% of the public gave Bush a favorable rating. It's the least favorable approval rating for a U.S. president since Jimmy Carter's approval rating dropped to just 22%.
While that lousy view of the job Bush is doing will help set up a more-contentious election in November, here's a curious fact that investors will find quite rewarding: The key to better stock-market returns isn't having a president we "love" – it's having a president that we don't quite hate.
Let me explain.
According to a study of presidential approval ratings by Ned Davis Research that looks back all the way to the days of President John F. Kennedy, when the president's approval rating is below 35%, as it is now, the Dow Jones Industrial Average Index loses an average of 5.9% per year. When times are good and presidential approval ratings exceed 65%, the Dow rises at an annualized rate of 2.6%. But when just 50%-65% of the public gives a favorable rating, the markets do a bit better and the Dow rises at a 5.4% annualized clip. [Click here for the full chart on how the Dow has performed during different presidential administrations.]
Now here's the really interesting part.
When the majority of Americans disapprove of how the president's doing his job, and the approval rating clocks in between 35%-50%, the Dow posts an average annualized gain of 12.3%. In other words, when less than half the population has a favorable view of a sitting president's performance, the Dow's upside potential improves by 127.78%.
Talk about a counter-intuitive result!
For next year, then, it seems that the key isn't for us to elect a president that everybody likes; instead, the country needs to elect a president that the masses "hate" a bit less than they dislike Bush and who only does his job well enough to garner the support of between 35% and 50% of the population.
Anything worse, and the Dow could fall, which given "The Dubya's" current lackluster rating, is right on track for how the markets are behaving lately.
Story continues below…
And that has us thinking: Who amongst the presidential contenders that are left do we like the least?
[Editor's Note: This story is part of Money Morning's ongoing "Election 2008" series covering the investing impacts of the presidential campaign. Contributing Editor Martin Hutchinson has personally interviewed the economic advisors for candidates McCain, Obama and John Edwards and concluded that Obama and McCain would be the best candidates for investors. For a full report on the "presidential profit plays" that was derived from Hutchinson's research, please click here. The report is free of charge.]
News and Related Story Links:
Election 2008: The Achilles' Heel of Obamanomics
United States Presidential Approval Rating
Ned Davis Research
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean, and he's also the founding editor of Straight Line Profits, a service devoted to revealing the "dark side" of Wall Street... In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.