As the Republicans move closer to choosing a candidate to run against President Barack Obama, Hans Olsen talks to Senior Editor Lorie Konish about his firm's research into the psyche of the American consumer and how investors should look at this year's presidential election.

1. What conclusions have you drawn from your elections report?
As far as any durable predictive ability, there's something more that's insightful from this, which is, if I were running for reelection, it's essentially an exercise in winning a consumer. What does the consumer look like, and what are my chances for reelection? And from that, you start from the position that the incumbent has a considerable advantage, because they have power, they have the levers of power. And so if I were an incumbent, I would be saying... things are looking better. Look at what happened during Christmas. The retailers are in a better mood. People obviously had a great Christmas, and oh, by the way, unemployment is beginning to kick down. It's really about the consumer and thinking about the election as a consumer test.

2. What about the opposing party?
They should take little comfort beyond the notion of opportunity in that. [Mitt] Romney's numbers, compared to the President's, really are not that good, and you would think, despite the panel of woe that we put up in those stats, that a challenger would actually have some very compelling numbers against an incumbent [with] those types of stats, both on consumer confidence, unemployment, the misery index and the like. But yet there was no resounding difference there, or wind at the person's back on the part of the opposition, which is remarkable.

3. Why is the misery index important?
In the late 1970s, early 1980s, the misery index was essentially the unemployment rate plus the inflation rate. Now, both unemployment and inflation really haven't been a problem for a very long time. Yet here we are post the great bubble crack and we're into recovery, yet the unemployment in this recovery remains not very far from where it was during the peak of the crisis. And inflation, far from being the case where we're actually going to see deflation, we're seeing inflation at a fairly decent clip. You add the two together and that makes for a rather interesting story from the misery index.

4. Are there any events that would define the election?
The unemployment rate is the one [issue] people will anchor to, especially the political class. But investors should look at employment — people actually working. The other thing that we'll continue to look at would be the consumer surveys. That's going to be very instructive. And the third would be the small business sector. Something like 50% of private sector GDP comes from the small business sector. And 60% of all hiring occurs with those folks.

5. What are the best things advisors can keep in mind in this kind of year?
Advisors need to [keep] their clients focused on core principles. What they need to remember is that people with capital have an advantage in this environment. The great irony is there is a shortage of investable capital that is sitting on the balance sheets of banks. And so by keeping people focused on what their risk tolerances are and their return objectives need to be, they can optimize that advantage through committing the capital where it's in shorter supply, and get the best risk-adjusted return. Hard as hell to execute. But if you do that right, you will move into the elite group of advisors serving their clients well.

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