Articles and Analysis


Are Stocks Like Tracking Polls?

Topics: AAPOR , Barack Obama , Stock Market

Earlier this week, President Obama analogized recent short term stock market fluctuation to changes in a political "tracking poll." TalkingPointsMemo captured the video and Ben Smith provided a transcript:

What I'm looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing. And, you know, the stock market is sort of like a tracking poll in politics. You know, it bobs up and down day to day. And if you spend all your time worrying about that, then you're probably going to get the long-term strategy wrong.

I took Obama's point about the potential for meaningless "day-to-day gyrations" in both tracking polls and stock prices, yet still found the analogy a little jarring since tracking polls and the stock market differ so much. Wondering if other pollsters had a similar reaction, so I asked using the listserv of the American Association for Public Opinion Research (AAPOR) and the smaller universe of those following me on Twitter.

Most agreed that Obama's underlying point was basically valid: The stock market, like a tracking poll, is subject to a lot of short term and seemingly random variation, albeit for different reasons (see the "random walk" hypothesis). As Democratic researcher Jason Boxt put it, "one blip doesn't a trend make."

Yet several agreed with Republican pollster Alex Lundry that the analogy is "crass" or otherwise imperfect. As Doug Strand points out, "the stock market is not going up and down right now, it's largely going down." A sustained four-month drop in a tracking poll would certainly cause a pollster to reevaluate their long term strategy. But how much of that decline is a reaction to Obama's economic proposals? Opinions on that question will differ.

Whatever your judgement about the value of the stock market and opinion polls as tools to evaluate the state of the economy or Obama's long term economic strategy, it is important to remember that stock traders on any given day are not a representative sample of all Americans or even of those that own stocks or mutual funds. And while virtually all stock traders make some sort of judgement about the future value of the stocks they buy or sell, those judgements are influenced only partially by their view of the overall economy and their evaluation of the merits of Obama's economic policies.

I have reproduced the longer comments from the AAPOR listserv below, as they raise some interesting points I had not considered. Most of these comments come from survey researchers with an academic bent.

In his comments, Doug Strand asks to see more of the context of Obama's remarks. I've embedded below the full C-SPAN video of the question and answer session with British Prime Minister Gordon Brown. The question about stock market trends comes at 8:33. The version at C-SPAN.org includes an interactive transcript.

Also, our comments section is wide open, so please post your thoughts.

Mellissa Marcello, president of Pursuant Research:

I read the quote prior to your posting on AAPORnet, and I have to admit I was not too troubled by it. I believe that public opinion is fluid, and if we look at any single point in time, we run the risk of misreading how people (or the markets) really feel (perform) over the long-term. What I have to believe Obama was really saying was that he was not going to grandstand for the sake of keeping Wall Street happy. This was directed, in part, towards Bill Clinton who recently publicly urged Obama to speak more positively about the economy. Obama would like us to believe (and I have no reason to believe otherwise) that he is not going to pander to the markets, or public opinion, when it comes to working on long-term solutions to the country's economic woes.

Doug Strand, an election researcher at UC Berkeley's Survey Research Center (speaking for himself only):

It would have been helpful to see more of the context of his remarks, like a full transcript of that session with the press? (I can't find a transcript or video that encompasses more than the quote you have below).

But based just on that paragraph you quoted below, it appears to me that Obama's words were very poorly-chosen. As conservative talk show hosts have gleefully pointed out, the stock market is not going up and down right now, it's largely going down. I believe the Dow is down about 1/3 since election day. If Obama's percentage in a tracking poll had dropped 1/3 over a 4 month period after the primaries in '08, I bet Hillary would have drafted to replace him. What he may well have meant is that the stock market can go up and down from year to year -- rather than day to day -- and that alone shouldn't mislead one about the long-term growth of the stock market for investment. And that is what I believe most investment advisers would say.

Matthew Jans:

To the degree that both are quantitative time series, the analogy seems appropriate. I think his point about looking at overall trends, not dayto day (sometimes random) fluctuation is a good one (for polls and the stock market both, as well as other longitudinal quantitative measures).

Francine Cafarchia:

He is correct if you consider only those that trade and/or have some influence on Wall Street market fluctuations, but it is obviously not a representative sample. That said, the balance of the population whose reactions are not directly registered in the stock market's fluctuations will likely be influenced by the market's performance and as such, may lead to a correlated response among the rest of the population. Of course, the general population's response may be tempered by their attitudes towards "Big Business", but most people's sentiments about the economy and "how things are going" follow what is happening in the stock market. So in the end, you could have the similar results had you done a formal poll.

Phillip Downs:

I think the analogy between stock market fluctuations and fluctuations across poll results over time has some merit in that our basic values keep poll results over time from being absolutely rudderless just as the underlying value of our economy keeps the stock market from being absolutely rudderless over time.

While our attitudes on specific issues (as with valuation of specific stocks) can be fluid over time given different circumstances and information, we do not change our basic value system (or the worth of the market) from month to month or from year to year.

However, when there are extreme shocks to either system (our value system or the market), results tend to become more rudderless. For example, under life and death and other extreme circumstances, human behavior and attitudes become more variable. Under our present near-death scenario for the market, valuations become more variable.



As (apparently) JP Morgan said, when asked what the stock market would do: "It will fluctuate."

As some of the above comments illustrate, given a fairly stable race, a poll will vary daily, but the net result will not change. When people talk about 401k's losing value, that's only relevant if the person is retiring now. Wisely-chosen investments made with a long-term view will recover - it will just take time. So in a sense, the stock market is like a poll, just played out over a longer period of time.

Perhaps it shows that Obama would rather tackle deeper problems like healthcare (which is one of the reasons GM is tanking)... Makes sense, if you ask me :-)



I dont know what to think of the analogy -- It is imperfect, but it works in the sense that he is saying that he is not making reactive judgments based on what the market is doing. Furthermore, I am not sure why or when the market got so tied to the President's actions (or as Chris Matthews called it "the President's scorecard") The market, as I view it, is a scorecard - of how speculators view the future profits of companies -- Now, how that got completely tied into how President's make decisions I'm not sure and could explain why, in the past, we have gotten short terms fixes that make the markets jump. Maybe we need a President who does not look to the markets as his or her "score" and perhaps that President would be better off if we disentangled their political fate from the futures markets a little bit as well..



The analogy is only skin deep. While both go up and down (and sometimes randomly) well designed tracking polls have other measures built in (demographics of the respondent, psychographic and life style measures) so that the dynamics and reasons behind the daily changes can be interpreted or not interpreted accurately.

In contrast, gyrations in the stock market are often truly random, and I am amazed at the post-rationalizations of the changes made by experts at days end.

Those that analyze stock index tracking such as chartists, do not tell you why the market is changing, but only what the changes mean for future changes up or down.



The markets have NOT been going down for 4 months.

They have been going down since Oct '07 - 17 months.

Ergo, there any theory that postulates that Obama's policy proposals hav caused the market is invalid. It does not account for the markets' continuous drop in the first 13 months. (And the 17 month drop is probably more due to the collapsing finacial ssytem, US households drowning in debt and the fact that the total household debt is now equivalent to the annual GDP - something that hasn't happened sinc 1929.)

The daily behavior of those buying and selling in the markets resembles a cat on a hot tin roof. They can't decide whether to buy on the rumor, sell on the news, do both or do neither depending upon which way the wind is blowing. Too much testosterone running lose on Wall St.



Let me add a slightly different twist: Whether or not tracking polls and the stock market are similar, stock market fluctuations are treated as vox populi by the news media. As they report on presidential speeches, policy initiatives, etc, particularly those related to the economy, they inevitably gauge market reaction. It has the advantage of being quantitative and immediate, and - with many of us tied in through various retirement plans - highly relevant to large numbers of Americans. The question I think we should ask is whether the market SHOULD be able to serve as a referendum on presidential decision-making. And - if it does - does responsiveness to stock market fluctuation lead to better (or worse)long-term policy decisions. The downward trend may reflect a negative evaluation of Obama's policies OR the very real market failure that preceded his administration.



First, let me echo the observation that stocks have fallen since 2007, but were not taken as a Bush Administration negative report card in the main stream media at the time. Second, look at the Dow Jones in 1981 and 2001. If I recall correctly, you will see that Reagan and Bush 43 were doing about as badly as Obama on the stock market chart report card at this point in their first terms. I also find it interesting that the best period in stock market history came under President Clinton, but none of the commentators touting the stock market indexes as the presidential report card now gave Clinton any credit whatsoever at that time nor give him any credit now.


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