After the first few months of President Barack Obama’s term in office, I wrote about the carnival rollercoaster the market was riding. Looking at the blue line below, that post may have foreshadowed his tenure! The average of four-year presidential cycles from 1953 through 2008 shows that the S&P 500 Index generally remains flat for almost the first two years, before heading higher in the second half.

Despite the S&P’s wild ride, the market is significantly higher than when Obama took the oath. Does this ensure a victory for the 2012 election?

To paraphrase common fund disclosure, past performance is not indicative of future presidential performance. Rather, victory for the president depends on what the market does in the next few critical months.

If the S&P remains strong, then the answer might be yes, says Adam Hamilton from Zeal Intelligence. He points to research done by InvesTech, which looked at market results during the two months leading up to the presidential election since 1900. If stocks rise in September and October, the incumbent party usually wins the presidency; if equities drop, the incumbent typically loses. “Out of the last 28 presidential elections, this simple indicator has proven correct 25 times. This is an astounding 89 percent success rate!”

Piper Jaffray found very similar results. The firm reviewed the S&P 500 performance for the three months prior to an election year since 1928. According to its study, the incumbent party won 11 out of 14 times when the S&P rose, and lost 6 out of 7 presidential elections when the S&P declined over the three months.

So why does this happen? It’s the market’s effect on Americans’ psyche. Adam says, “When the stock markets are strong so everyone feels better about the future, incumbents are more likely to win.”

Adam explains what many of us feel: When stock prices are rising, people are more optimistic, and spend more; when markets take a turn for the worse, people become concerned and spend less. “Not surprisingly, these behavioral changes spawned by our rising and falling portfolios also carry over into the voting booths.”

With this in mind, a market correction in the months coming up to the election means Americans will “naturally start getting worried and anxious,” says Adam. “So they start to look for a change in leadership to fix things, to improve the economy and their own chances for success. If an election happens then, they like to vote in new blood for change.”

Read his article in its entirety.

So how has the market typically performed? Going back to Piper Jaffray’s data, since 1928, August has historically been a “much stronger month” during election years as compared to all years. The S&P typically sees a return of about 1 percent in August; during election years, this number pops to about 3.5 percent. Also during election years, September and October have historically declined slightly.

In early August last year, the S&P dropped 12 percent in three days because of the unease over the eurocrisis and the U.S. debt downgrade. Both have parallels to what’s happening today, says Ed Hyman from ISI. He speculates that the U.S. will see a “repeat of 2010/2011, which implies a weaker economy for a few more months before improving in the fall.”

However, there are positive signs in the U.S. market today, with ISI pointing to an energy and tech boom, interest rates near zero and a cheap dollar. Also, U.S. consumers are reducing their debt burdens, with household debt as a percentage of disposable income having come off its high, and house prices in America are “among the world’s cheapest,” according to The Economist. 

Which way do you think the market will head over the next few months? Let us know at editor@usfunds.com.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content.

The bridge at Hoover Dam is a fantastic example of breathtaking infrastructure built in the U.S. Linking Phoenix and Las Vegas, a 2,000 foot long bridge now arches over the Colorado River, shaving as much as two hours off a driver’s commute between the cities.

Nearly halfway completed in this photo, it’s the first concrete-steel composite arch bridge built in the U.S., named after decorated Korean War veteran and governor of Nevada Mike O’Callaghan, and Pat Tillman, who gave up a multi-million dollar football career to enlist in the U.S. Army and fight in Afghanistan where he was killed by friendly fire.

Construction for the $114 million arch began in 2005 as part of the Hoover Dam Bypass Project and was open for traffic on October 19, 2010. The photographer of the image is Jamey Stillings from Santa Fe, who was in between assignments when he took a road trip to capture Lake Mead’s mineral deposits. Heading home, Hoover Dam’s infrastructure caught his eye and compelled him to return to the area by helicopter and car to photograph the infrastructure and surrounding area. The New York Times Magazine featured an incredible slideshow showing the tremendous scale of Stillings’ project.

See the Slideshow.

According to an article in The New York Times about Stillings, his passion was fueled by “the wider historical significance of the construction. The Empire State Building, the Eiffel Tower, the Hoover Dam—the imagery their births created is burned into the collective memory.”

We believe the bridge underscores the ongoing need for natural resources. You’ll find more awe-inspiring stories like this one in the latest Shareholder Report, as we cover what you need, what you want and how much it will cost.

Click on the link below to see the online version now. If you’d like to read it in print, call us at 1-800-873-8637 or email at editor@usfunds.com.

Download the Report

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

One of the few things that Barack Obama and Mitt Romney can agree on is that our economy is still struggling to regain its strength. Stubborn unemployment and sluggish growth at home combined with a slowing China and a dysfunctional eurozone have cast a dark shadow on America’s eternal optimism. The media favors negative news and the 24/7 cycle of gloom and doubt can be dispiriting.

We are always looking for the economic points of light around the globe and strive to provide a counterpoint to the pervasive pessimism. As Warren Buffett once said, “It’s never paid to bet against America. We come through things, but it’s not always a smooth ride.”

I moved from Toronto to San Antonio more than twenty years ago. A Canadian pursuing the American Dream. I bought a business that became U.S. Global Investors. I believed back then, as I still do today, that there is nowhere else in the world where opportunity abounds and initiative is rewarded as it is in the U.S.A. “Despite all its setbacks, the U.S. remains at the center of world competiveness because of its unique economic power, the dynamism of its enterprises and its capacity for innovation,” according to IMD, a well-regarded Swiss business school.

IMD recently released the findings of its annual World Competitiveness Yearbook (WCY). Its rankings survey more than 4,200 international executives and measure how well countries manage their economic and human resources to increase prosperity. The top three most competitive of the 59 ranked economies in 2012 are Hong Kong, the U.S. and Switzerland.

Barron’s editorial page editor Thomas G. Donlan wrote, “It’s worth contemplating the advantages that a group of international business executives and analysts still can find in the U.S. economy. At the top is access to financing, following a strong research-and-development culture, an effective legal environment, dynamism of the economy, a skilled workforce, and reliable infrastructure. At the bottom, they find the U.S. lacks competency of government and a competitive tax regime.”

During tough times, Americans must be vigilant in safeguarding our competitive edge by continuing to be a compassionate and generous nation while resisting the siren calls of socialism. A system that strangles private property rights and sponsors excessive bureaucracy, regulation and taxation cannot deliver on a promise of prosperity to its people. We must not lose our collective faith in capitalism because it has proven to be the only social system that rewards individual ability, initiative and achievement.

What Henry Ford said a century ago holds true today, “What's right about America is that although we have a mess of problems, we have great capacity—intellect and resources—to do something about them.”

The Economist’s cover story last week heralded America’s economy the “Comeback kid.” “Led by its inventive private sector, the economy is remaking itself. Old weaknesses are being remedied and new strengths discovered, with an agility that has much to teach stagnant Europe and dirigiste Asia,” according to the story.

The story notes that while America’s overall growth is unimpressive, some components show signs of boom. We have shifted from a consumption-driven economy to a more outward-facing one. In the post-recession economy exports contributed 43 percent of growth, one of the strongest showings in any recent economic recovery. While sales to traditional markets in the OECD have risen just 20 percent since the end of 2007, they are up 51 percent to Latin America and 53 percent to China.

According to The Economist, emerging markets have also reinvigorated America’s role as a big commodity producer. Grain exports are soaring, agricultural land values are rising, and higher oil prices have triggered new output. American innovation in discovering new techniques to release oil and gas from shale has paid massive dividends to the energy sector and created thousands of new jobs in the industry. I wrote about this employment boom recently in Frank Talk and we see this explosion of growth first-hand just south of San Antonio with the development of the Eagle Ford Shale.

Cheap, plentiful natural gas benefits industries as diverse as glass, fertilizers, plastic and steelmakers. Last year for the first time in decades, America became a net exporter of refined products. And our nation’s gap between oil consumption and domestic production is shrinking.

A way to take advantage of a potential upturn in commodities is by choosing dividend-paying global resources equities. In the S&P 500 Index, nearly all of the materials and utilities stocks and more than half of energy companies pay a dividend that is higher than the 10-year Treasury. Materials and utilities companies yield an average of 2.3 percent and 4.1 percent, respectively, while energy stocks pay an average yield of 2.2 percent. We like the combination of income with growth and it is an important factor in our stock selection process for the Global Resources Fund, as well as our other equity funds.

We believe there are many great American companies to invest in. We like those that are growing their top line revenues and paying robust dividends. Currently 47 percent of the S&P 500 stocks pay a dividend yielding more than a 10-year Treasury, demonstrating the resiliency and strength of American enterprises.

Professor Stephane Garelli, director of IMD’s World Competitiveness Center, said, “U.S. competiveness has a deep impact on the rest of the world because it is uniquely interacting with every economy, advanced or emerging. No other nation can exercise such a strong ‘pull effect’ on the word. In the end, if the U.S. competes, the world succeeds!”

It is the nature of humans to compete. The Summer Olympics commencing next week in London will bring together more than 10,500 athletes from 204 countries to compete for the gold. I look forward to watching this showcase of the human spirit and the drive to succeed.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.