An indicator that has predicted the outcome of presidential elections with 87% accuracy bodes well for President Trump.
The Socionomic Institute, in its research going back to George Washington, found 16 times in history when an incumbent U.S. president ran for reelection and the stock market was up more than 20% in the preceding three years, CBS News reported.
In 14 of those 16 instances, the incumbent won reelection.
“The stock market is an indicator of social mood,” said Matthew Lampert, the group’s director of research. “Historically, a more positive trend in the market and social mood is associated with a win for the incumbent.”
The two anomalies were George H.W. Bush’s loss to Bill Clinton in 1992 and John Adams’ defeat in 1800.
The Dow was up 38% in the preceeding three years under Bush, but Clinton won with a plurality of just 43% of the national popular vote, with independent candidate Ross Perot garnering nearly 19%.
Earlier this month, a poller that correctly predicted Britain’s Brexit vote and the election of Donald Trump in 2016 found the president was on track for victory, despite other polls showing Biden with a significant lead. The Sunday Express/Democracy Institute poll predicted Trump would win 320 Electoral College votes, compared to Biden’s 218.
CBS noted some caveats to the stock-market indicator, including the fact that Goldman Sachs analysts believe the rise in stock prices since September is related to political polls predicting a Biden win.
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The Socionomics researchers also found that the market is a more reliable predicter of elections when the gains are across a number of sectors. Currently the gains are concentrated in tech stocks.
Nevertheless, CBS reported, Socionomics’ research director, Lampert, says the stock market numbers are in Trump’s favor.
“Donald Trump is a controversial figure, and 2020 is far from a typical election year,” said Lampert. “Every election has dozens of reasons why it might be different, but the history has been what it’s been. We’ll see if it holds this time.”
CBS reported market strategist Ryan Detrick of LPL Financial also thinks the market also favors Trump.
He told clients in a note that market performance in the three months before an election has been a reliable predicter.
“We think it’s going to be a lot closer than the polls may suggest right now, similar to what we saw in 2016,” Detrick said.