With the first serious Republican presidential debate taking place this week, it's time for all of us to prepare for the onslaught of spin -- from both sides of the aisle -- which visits us every four years.
But while millions of dollars are spent vying for your attention -- and your vote -- I think I've found the single metric that may be the best predictor of who wins the White House in 2012.
It's the economy, stupid!
James Carville was on to something when he hung a sign in Bill Clinton's campaign office with the above quote. With George H.W. Bush coming off a highly successful military campaign in Iraq, and his approval rating at a whopping 90%, it looked as though the Democrats didn't stand a chance.
But as we all know, the economy started to head south as Election Day approached, which weighed heavily on voters' decisions. With that stunning reversal in mind, I went back to crunch the numbers. What I found was persuasive.
The chart below shows how the Dow Jones Industrial Average performed in the two months leading up to the election, and whether the incumbent party kept or lost the White House.
Source: Analyzeindices.com, Google Finance.
A careful examination of this chart shows that out of the past 28 presidential elections, the movement of the DJIA in the two months prior to Election Day has predicted the outcome 25 times. If the DJIA is up, the incumbent party wins; if it's down, the incumbent party loses. This simple metric has a success rate of just under 90%, which isn't bad at all.
And we all know that one of the three exceptions -- 1968 -- can generally be thrown out as an outlier because of the chaos that followed Lyndon Johnson's withdrawal from the race, Bobby Kennedy's assassination, and the debacle that was that year's Democratic National Convention.
Of course, this in no way proves causation. In the end, it could be reasonably argued that this is a chicken-and-the-egg type question. Maybe the market -- which notoriously hates uncertainty -- was down because it was starting to price a change in power into the market index.
Who to keep an eye on
Because the DJIA is a price-weighted average, certain companies hold larger sway over the index's performance than others. In fact, the top eight companies (out of 30) account for nearly 50% of the index's performance. Below are those eight stocks, with their accompanying weight on the index.
Weighting on DJIA
Everything from the price of oil (Chevron and ExxonMobil) to our daily eating habits (McDonald's) to defense contracts (Boeing) can sway this index heavily.
Clearly, I'm jumping the gun here. The election isn't set to occur for another 17 months -- and I'll surely be revisiting this article when that time comes.
I wanted to publish this now, however, because I know that we'll all be bombarded by a dizzying number of facts, accusations and ads over the next year. With so much information out there, I like to see if I can pinpoint one or two metrics that will help me see clearly into the future. Sometimes this works, sometimes it doesn't.
If you'd like to follow along with me, add these eight companies to your watchlist to keep tabs on them.
Foolish contributor Brian Stoffel has no plans on running for any office. He does not own shares in any of the companies mentioned. The Motley Fool owns shares of International Business Machines. Motley Fool newsletter services have recommended buying shares of 3M, McDonald's, and Chevron.
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