In 2016 all of the major polls predicted that Hillary Clinton would WIN.
Yet the Presidential Predictor disagreed. And it accurately predicted that Republican Donald Trump would WIN the election.
The Presidential Predictor was created by CFRA’s Sam Stovall.
It tracks the performance of the S&P 500 from July 31 – Oct. 31 during an election year. Since 1944, positive returns for the stock market indicates that the incumbent party will retain the White House.
Meanwhile, if the stock market drops during this time it’s very likely that a new party will win the presidential race.
So, what is this stock market indicator saying about tomorrow’s election result?
Stocks have had a huge bounce back from the March lows – soaring more than 50%. However, stock prices have been under pressure for the last month.
On Friday, the S&P 500 closed down 1.2% at 3,269. That’s below the July 31 reading of 3,271.
The Presidential Predictor says that the one-point decline for the S&P 500 during the last three months means Joe Biden will win.
“The Presidential Predictor implies, but does not guarantee, a Biden victory,” said Stovall.
The indicator has accurately predicted 16 out of the last 19 Presidential Elections. That’s an 84% accuracy rate. Below you can see the complete data since 1944.
You’ll notice that the indicator has been wrong on three occasions.
In all three of these elections, there were large geopolitical factors that may have influenced the election result. And these include:
- 1956: Suez Canal crisis
- 1968: Vietnam War
- 1980: Iran hostage crisis
So, it’s certainly possible that the current pandemic and economic crisis plays an outsized role in the election results. This could be another large outside influence that affects the election results – and renders this indicator incorrect.
Additionally, it’s worth noting that the drop from July to October was tiny. We’re literally talking about two points on the S&P 500 or 0.06%.
However, the S&P 500 has dropped nearly 9% since the intra-day high on Sept. 2.
While stocks are NOT crashing – the move puts the index on the cusp of a 10% correction.
It’s hard to know whether the S&P 500 Presidential Predictor will get the election result right again in 2020. Within a few days, we’ll know the answer!
Right now, I’m organizing a special post-election webinar briefing. It’ll reveal urgent details on my two trades to make immediately after Tuesday’s election result.
Yours in Wealth,