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As stock market rallies, so do the odds of Obama's reelection

President Barack Obama.

By msnbc.com staff

President Obama’s odds of re-election later this year are growing alongside the Standard & Poor’s 500 index’s biggest rally to start a year since 1991, suggesting that investors are growing more confident in the U.S. economy, according to a Bloomberg News report.

The broad stock market gauge has climbed as much as 7.5 percent in 2012, the most in 21 years. At the same time, unemployment is falling and the Federal Reserve has promised to spur growth by keeping interest rates near zero through 2014.

Alongside these factors, the cost of a bet at Dublin-based bookmaker Intrade on Obama’s reelection has risen 14 percent since the start of the year, up from $5.20 on Jan. 1 to $5.93 on Monday. During that same period, trading volume on the Obama reelection bet on Intrade’s website has also increased significantly.

“A better economy clearly improves the president’s re- election chances,” David Kelly, a chief market strategist for JPMorgan Funds in New York, told Bloomberg. “The markets are pretty good at figuring this out. If you look at the economy and you look at the string of data you can pretty much figure out what the odds are.”

In fact, Obama’s re-election prospects have followed the ups and downs of the stock market for the past year, dipping in the late summer of 2011 as Europe’s debt crisis threatened the global recovery and moving higher later in the year as the job market improved.

The business of online betting has blossomed into a multi-million dollar industry in recent years. Millions of dollars are now being wagered on the U.S. elections every four years, and experts say the odds on websites like Intrade are proving to be far more accurate real-time predictors of election outcomes than political pundits or over-quoted public opinion polls.

Intrade’s predictions have been spookily accurate. They proved prescient in 2008 when futures put Obama’s odds of winning the presidency above 50 percent on all but eight days in the five months before the Nov. 4 election, Bloomberg reported. John McCain averaged about a 33 percent chance he would win during the same period, according to Intrade data, Bloomberg said, adding that the only period when the betting website put McCain ahead of Obama was when Lehman Brothers filed for bankruptcy in September 2008.

Stocks have moved higher since last October as the U.S. economic picture has improved. Earlier this month, The Fed has warned of dangers to the economic recovery, but others remain bullish. Last week, Laurence D. Fink, chief executive officer of investment powerhouse BlackRock, said investors should have 100 percent of their holdings in stocks because they offer higher returns than bonds.

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