Video: Is Obama’s loss Wall Street’s gain?

Sharp investors always look for leading indicators to market shifts, and Jim Cramer thinks he’s found a doozy. After watching this segment, it’s hard to disagree, too. Watch as Cramer overlays his newfound market predictor over S&P 500 performance over the last few weeks, and see if you see the same correlation:

Cramer has identified a correlation in the market that can be tracked quite reliably from the March low. What is it? Obama’s disapproval rating. How closely does Obama’s disapproval rate align with the actual market? If you take a close look, Cramer points out that the charts are practically identical, with disapproval for the President rising in tandem with the market’s huge run from the big March bottom. Coincidence? Cramer doesn’t think so.

The President’s agenda had investors worried about many parts of the market, but as the President becomes less popular – and correspondingly less powerful – the threat to those industries has waned and the entire market has rallied, says Cramer.

If some of Obama’s plans don’t work out – plans which much of Wall Street considers to be bad for business – such as card check, forced arbitration for unions, cap-and-trade and health care reform… As more people disapprove of the President,there’s nothing to be scared of, says Cramer.

Well, let’s hope so. Strictly speaking, Obama and the Democrats in Congress can spend all of their political capital in 2009-10 passing these monstrosities and then blithely accept defeat in the midterms as a good trade-off. That’s unlikely, though, as nothing motivates a politician more than keeping his seat in Congress.

That certainly would explain the summer rallies. They hit their stride at about the same time, roughly, as when the CBO began scoring ObamaCare. The rapid loss of support for health-care reform and loss of confidence in Obama’s economic mastery may have indicated to Wall Street that Obama had reached the functional limit of his power. America has spoken loudly that they do not want radical change, and that may have emboldened some investors to get in early and ahead of the curve.

If Cramer’s right, where would investors go? Cramer suggests health care and gold, but the energy sector might be a decent bet for folks willing to make a gamble.

Update: Yes, I know correlation is not causation, but correlation is at least intriguing.  The real problem with this is that Obama’s negatives will eventually top out at some point.  Even if this is linked, it will eventually de-link.  The usefulness of this indicator may already be over for investment purposes — but it’s certainly interesting in the political sense.

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