How will politics impact the markets? How will politics impact the markets? https://stage-fii.federatedinvestors.com/static/images/fhi/fed-hermes-logo-amp.png https://stage-fii.federatedinvestors.com/daf\images\insights\video\political-map-businessmen-small.jpg March 10 2020 February 26 2020

How will politics impact the markets?

Six indicators can be predictive of the election outcome.
Published February 26 2020
My Content
Video Transcript
00:03
I'm Steve Chiavarone, Portfolio Manager and Equity Strategist at Federated Hermes.
00:08
What is Federated Hermes' re-election dashboard?
00:11
So the re-election dashboard is an attempt for us to put together an objective look at primarily economic data to give us a sense as to what the chances of the current president, what the current president has in terms of being re-elected. We're not in the business of predicting political outcomes. We are in the business of trying to understand how politics are gonna impact the markets. And so what we've done is we went back, went all the way back to the Eisenhower administration, and we identified six indicators that have historically been predictive of whether or not an incumbent president is likely to get re-elected.
00:41
And it's stuff that you would expect, it's intuitive. It's are incomes growing, is the stock market going up or down, are consumers confident, is unemployment going up or down, do I have a recession in the third or fourth year, and then how popular is the president? And what we've identified is that when presidents have had zero, one, or two of these factors in their favor, they lose. When they've had four or five or six, they win. And so what we do, is it's not, we run it at the end of each month, and it's not designed to predict what these things are gonna look like in November. It's to say based on the data today, what is the market telling us about the chances that the current president is likely to get re-elected? And we can evaluate it, it moves over time, and it gives you a sense in real time kinda how the interactions of the market and politics are taking shape.
01:27
Which of the six factors are you most closely monitoring at this stage of the election cycle?
01:31
So we equal-weight the factors. We think that all of them are important. What we're really trying to get a sense of is do I have economic optimism, do I have a scenario where pocketbook issues are going well and people don't wanna see a big change, and then is that translating into the popularity of the president? And so it's important not to cherry pick. I think the key is, is do I have a majority of these moving in the right direction? That is the information. It's not say, well, this one's looking really good, that one's not. It's to say where do they sit, where are they moving, and is the overall picture one of economic vibrance that will make the electorate more inclined to stick with the status quo? And right now, what those indicators are telling us is that's the case. Because incomes are growing, unemployment rate is falling, consumer confidence is high, the market's doing well, you don't have a recession, it looks like, it's on the horizon. And so, for all of those reasons, we think the picture's actually pretty good for the president based on our outlook right now.
02:32
Disclosure: Views are as of 2/5/2020 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Past performance is no guarantee of future results. 20-40043 (2/20) Federated Global Investment Management Corp.
Tags Politics . Markets/Economy .
DISCLOSURES

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

Past performance is no guarantee of future results.

Federated Global Investment Management Corp.