By Alan Hall
The Socionomics Institute has examined what swept heads of state from power in recent elections all across Europe.
In January 2012, the Institute reported a strong statistical connection between U.S. presidents’ winning/losing re-election bids and the U.S. stock market’s prior net percentage change. The Institute reported its findings in “Social Mood, Stock Market Performance and U.S. Presidential Elections: A Socionomic Perspective on Voting Results.” The paper generated considerable media interest, became SSRN’s third most downloaded paper for 2012 and ranked #70 out of 67,000 papers overall. (To read the paper, click here.)
Given the strength of the U.S. results, we decided to compare recent European election results versus each country’s prior market performance. For multiple reasons, it is difficult to formulate an apples-to-apples comparison in each of these countries. But we nevertheless found compelling evidence that voters in Europe, like those in the U.S., appear to unconsciously credit or blame the national leader for their collective mood, as reflected by their country’s stock market. In other words, when the trend in mood is negative, they tend to vote out their leader; when it is positive, they tend to vote him or her back in. This relationship appears to hold regardless of other factors, including platform.
How Each Country Fared
The authors of the U.S. study—Prechter, Goel, Parker and Lampert—found that stock market performance, especially during the three years prior to an election, was significantly predictive of a re-election’s outcome. U.S. presidents are elected to four-year terms; the authors surmised that voters tend to give the incumbents a pass for their first year of their first term in office.
In our quick study, we applied the same logic. That is, we compared the result of each recent election to that country’s stock market performance over the term of that leader’s office minus the first year. We did so in 15 European countries that underwent recent elections.
The bottom line: Of the 15 elections, 13 appear to support the socionomic hypothesis.
The two elections that less clearly conform to socionomic expectations deserve further discussion. Sweden’s September 2010 general election was the first in almost a century that resulted in the re-election of a full-term Swedish center-right government. But the bear market in social mood apparently had some impact on voters. Reinfeldt failed to secure a majority. Under the headline, “Political Earthquake Shakes Up Sweden,” The New York Times wrote, “Elections on Sunday gave an anti-immigration party its first parliamentary seats and deprived the governing coalition of its majority, plunging the country into rare political instability.”