Broker Check

Predicting The Election

July 22, 2020

 As we saw in 2016, predicting the presidential election can be difficult.

But quite accurately the stock market has forecasted whether or not the incumbent party wins come November.



As our friends at LPL Research point out, since 1928 the stock market has accurately predicted the winner of the election 87% of the time and every single year since 1984. How? When the S&P 500 Index increases over the three-month period before the election, the incumbent party usually wins. When stocks move lower in those preceding three months, the incumbent party usually loses.

Consider the 2016 election - the market was down over the three-month period including a 9-day losing streak ahead of the election. The White House changed parties.

Keep an eye on this indicator when the three-month window begins in August.