Not Another Politics Podcast Is The "Strong Economy Equals Incumbent Victory" Theory Wrong?
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Jan 30, 2025 Explore the surprising connection between economic conditions and electoral outcomes, challenging the belief that a strong economy always benefits incumbents. New research suggests downturns may favor Democrats while booms help Republicans. Delve into how risk aversion shapes voting behavior, particularly among academics, and its implications for party support. The podcast also questions the link between political parties and stock market returns, revealing complexities in how economic realities influence voter decisions during elections.
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Economic Influence on Voting
- When the economy is weak, people desire a safety net and may vote Democrat.
- During economic booms, people feel optimistic and might prefer Republicans and lower taxes.
Stock Market Performance and Presidencies
- Stock market returns tend to be higher under Democratic presidents, not because of their policies.
- It's because they are often elected when expected returns are already high due to market conditions.
Trump's Election and Market Performance
- Viola Giudão questions how the stock market performed well after Trump's election, seemingly contradicting the theory.
- Pastor explains this as a short-term effect tied to uncertainty resolution, distinct from long-term trends.