Tuesday’s Iowa Republican caucus ended in a virtual tie between Mitt Romney and Rick Santorum, with Romney “winning” by a scant eight votes, 30,015 to 30,007. But with only 119,188 Iowa voters taking part – representing only 20% of Iowa’s registered Republicans, 3.9% of the people in Iowa, and 0.036% of the U.S. population – we’re not really talking about numbers that contain any lasting political value.

The main point to pick out of this noisy news is that the Presidency in 2012 is still Romney’s race to lose; and Romney is clearly a pro-business candidate, so we can think of Romney as Wall Street’s favorite son.

Election Years Usually Start Slow and Finish Fast

The Dow Jones Index zoomed up nearly 180 points on the first trading day of the year, followed by a consolidation Wednesday morning as traders digested the Iowa results, but it’s important to remember early in 2012 that most election years tend to start slow and finish fast. In election years, the biggest gains tend to come in the middle months of the year, when campaign rhetoric reaches a fever pitch.

According to The Almanac Investor, 14 election years from 1952 to 2004 (excluding the carnage of 2008) delivered an average 9.3% gain, but these gains tended to accelerate in the summer months. Since 1952, S&P 500 gains averaged 1.9% in the first four months of election years (the primary season), accelerating to +7.3% in the last eight months of the year, including the nominating conventions and election results.

As I blogged here two weeks ago in “Will 2012 be more like 1980 or 1996?”, the stock market has risen every time (since 1964) when an incumbent has run for re-election. In those eight elections, the S&P 500 gained an average 13.6%, with positive returns each time. There is a common-sense reason for rising markets in election years, since sitting Presidents do whatever it takes to get re-elected, while the challenger will offer the always-tempting hope of yet another “change” to “get America moving again.”

Our Winter-time Political Play-off System Must Mystify the World

Every January is “play-off season” in the National Football League. To earn the right to bask in a sunny stadium on Super Bowl Sunday (February 5), 12 teams must slog through three weeks of January snow, wind, and ice in towns like Pittsburgh, New York, Foxboro, Denver, and the frozen tundra of Green Bay.

It’s no different in our political play-off system. For nearly as long as the Super Bowl has existed, Iowa has hosted the first Presidential caucus, while New Hampshire has held the first primary. Noel Coward once wrote a ditty titled, “Mad Dogs and Englishmen go out in the Noonday Sun.” In America, I guess we’d have to change the words to “Sled Dogs and Presidents Campaign in the Frozen Mud.”   If Iowa were the first game of a play-off series, Romney and Santorum would need a “sudden-death” play-off.

Why do frigid Iowa and New Hampshire determine who our leading Presidential candidate will be? Is this a test of political stamina or simple manhood? Good ideas or thick overcoats? Do we really want just the most hale and hearty voters, with the best snow tires, to determine who our next President will be? With only 119,188 voters braving Iowa’s elements to debate a seven-horse race, why do we care so much?

A century ago next week, on January 12, 1912, the mercury hit –47øF in Washta, a small town in Northwestern Iowa. That is a state record that stands to this day, even though it was tied on February 3, 1996 when the mercury hit –47 in Elkader, in Northeastern Iowa. That was right around the time when aging Republicans like Bob Dole were stumping the state in their quest to unseat President Bill Clinton. (Senator Dole won the February 12, 1996 Iowa caucus with 26%, followed by Pat Buchanan with 23%.)

After Iowa, the next hunt for votes takes place in frigid New Hampshire, whose all-time low temperature is also –47, set on January 29, 1934 at Mount Washington, the highest point in New England, which also holds the world record for the highest wind gust measured on the earth’s surface, at 231 miles per hour on April 12, 1934. Mt. Washington is ironically located in the “Presidential Range” of the White Mountains.

Before the last vote in Iowa was counted, this year’s crop of Republicans scurried up to the Presidential Range in New Hampshire to see who is man (or woman) enough to win the horse race in the Granite State. But New Hampshire ranks a lowly 46th of 50 states in size and 42nd in population, with 0.4% of the American people living there. Candidates are not advised to go anywhere near Mount Washington, where the wind chill factor today is –45.3. (The current temperature in the state capital, Concord, is a balmy 8.) 

Another Type of Winter Madness Began 75 Years Ago – on January 20, 1937

Here’s another crazy winter ritual. From 1789 to 1933, the new President took office on March 4, a cool but not frigid time of year in Washington, DC. After the rapid rate of change in FDR’s “first 100 days” of 1933, politicians decided that the four-month wait between Election Day and Inauguration Day was way too long, so the 20th Amendment decreed that January 20 would become the new Inauguration Day.

The first January 20 Inauguration took place 75 years ago this month, in 1937. On that day, the mercury was below freezing in Washington, while setting all-time lows of –45 in California and –50 in Nevada.

Since then, several of our most important (and oldest) public officials have had to sit outside in freezing cold and windy weather for two hours every fourth January. On January 21, 1985, for instance, 72-year-old President Ronald Reagan took the oath from 77-year-old Chief Justice Warren Burger as a cold front swept the Eastern seaboard, killing 40. The mercury hit –30 in rural Virginia and –34 in North Carolina (state records). Temperatures hit –27 in Chicago, with the wind-chill factor doubling that number to –54.

The coldest weather of the year, on average, falls during the week of January 17-23, with January 20 being the coldest single date. Among our 50 states, the lowest lows came within three days of January 20 in 12 states (the most lows of any week), with the deepest declines coming on or near Inauguration day: 

• On January 20, 1954, the mercury hit –70 at Rogers Pass, Montana (a lower –48 low).
• On January 23, 1971, the mercury hit –80 in Prospect Creek, Alaska (a U.S. record).

Let us all be thankful that Montana and Alaska aren’t the next stops on the political road show. Instead, politicians will bask in South Carolina (January 21), Florida (January 31), and Nevada (February 4) next!

P.S. January in Market History – Excellent for Small Stocks, Good for All Stocks

January is a great market month in history. It is also the most volatile month, with the highest average daily point changes, up or down. Since 1950, January has the most cumulative Dow gains of any month. From 1950 to 1999, January rose 38 times and fell only 12 times. We saw nine straight rising Januarys from 1991 to 1999, but January has been up only five times and down seven times since Y2K dawned.

January is the #1 month for the NASDAQ index (as measured since 1971) and #2 in the Russell 2000 (measured since 1979), but it falls to #4 in both the Dow and S&P 500. It’s no secret that small stocks tend to soar in January. That’s the core of the “January effect.” Since 1979, the Russell 2000 has gained a net 16.8-fold (+1580%) from November to May, while losing a net 55% from June through October.