trump wave

Is the stock market predicting another Trump victory?

Most polls have Biden well ahead of President Trump and betting markets have Trump as an underdog with just a week to go before Election Day. However, we know that in 2016, Trump was in a similar position so it wouldn't be that shocking to see another upset win for Trump. The battleground states are very tight races so anything is possible. What is the stock market telling us about who will win the White House?

presidential election

I found this chart from Strategas Research Partners interesting. Typically the incumbent party wins when the stock market performs well. This is no surprise because it usually means that the economy is doing well, therefore, voters favor re-election for the incumbent President. If the economy is shaky, then people favor a change.

So let's take a look at the S&P 500 crystal ball. Who does the S&P 500 tell us will win the 2020 Presidential election?

6 month returns for the S&P 500 are +17%. This is well ahead of the six percent historical performance where the incumbent party won.

3 month prior returns are 4.7% vs roughly 4% historical. Again right in line with incumbent party winner.

1 month prior returns are +2.8% vs roughly 2% historical. Again in line with incumbent party winner.

If this chart does in fact indicate the next President of the United States, then all signs point to another upset win for President Trump.

If 2020 has taught us anything, it's that we have to think unconventionally to see all possibilities. It will be interesting to see who the winner will be. Hopefully we will know on Election Night or a few days after. If the final result drags on for weeks, then more volatility will be in the cards.

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About the Author: Chris Wang

Chris Wang

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