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The “presidential predictor” of the stock market is predicting Biden’s victory



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The stock market’s fall on Friday caused trouble for President Donald Trump’s re-election hopes.

CFRA chief investment strategist Sam Stovall promoted the “Presidential Predictor Index”, which tracks the SPX of the S&P 500 Index.
-1.21%
The performance of the presidential election year from July 31 to October 31. Going back to 1944, it was discovered that positive actions during this period usually corresponded to the victory of the president of the current party, while negative actions meant defeat (see the table below). .

CFRA

The S&P 500 rebounded late on Friday on the last trading day of October, but the magnitude was not enough. The index closed down 40.15 points, or 1.2%, to close at 3,269.96, lower than the closing price of 3,271.12 on July 31.

Stovall said in an email after the closing bell: “The presidential prophet implied but did not guarantee Biden’s victory.”

Opinion polls show that Democratic challenger Joe Biden leads Trump nationwide, even though his advantage has narrowed in recent weeks. Biden is also in a leading position in key battlefield states. Although strategists believe that Trump is likely to win the election college to a certain extent, his road seems to be more difficult than in 2016.

The “True Politics” average of the national poll on Friday showed that Biden is ahead of Trump by 7.8%.

see: Trump rally in Biden and Florida a few hours apart as the Democrats regained their lead in opinion polls in key states

People are worried about the dispute over the election results. In legal and political disputes, the results of the election in days or even weeks are not clear, which has become a major concern for investors.

related: The market is beginning to feel uneasy about the possibility of another split of the government after the Washington election

There is no perfect record of stock market indicators. In 1956, Republican President Dwight Eisenhower defeated democracy challenger Adlai Stevenson. Although the index fell by 7.7% in three months, it failed to arrive at the correct result.

The indicator twice failed to correctly predict the failure of the incumbent party. In 1968, the Republican party Richard Nixon defeated the Democratic candidate, Hobert Humphrey; in 1980, Ronald Reagan defeated the Democratic president, Jimmy Carter.

Stovall pointed out that these three failed cases were accompanied by extraordinary geopolitical factors. The weakness in the stock market in 1956 was related to the Suez crisis, after the Egyptian President Gamal Abdel Nasser (Gamal Abdel Nasser) decided to nationalize the Suez Canal and the Hungarian uprising was suppressed by the Soviet army, which intensified the Cold War tensions.

Despite the active stock market, the 1968 election was still dominated by the Vietnam War, and the Iranian hostage crisis was a key issue in the 1980 election.

Stovall said that this time, the market’s weakness before the vote was “driven by the COVID-19 surge again and the boost to future GDP/EPS growth,” shared.

The S&P 500 Index hit a record on September 2, but then fell back. S&P 500, Dow Jones Industrial Average, Dow Jones Industrial Average,
-0.59%
And the Nasdaq Composite Index,
-2.45%
Saw the biggest weekly decline since March.

Following the same concept, Ryan Detrick, chief financial market strategist at LPL Financial, has supported market performance in the three months ending on election day in 1928. The time of the year is from August 3 to November 3. .

This also heralds Biden’s victory. The Standard & Poor’s 500 index needs to close above the closing price of $3,294.61 on August 3 in order to switch to support Trump.


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