Although the fight against COVID-19 continues to dominate the headlines and our thoughts are with those affected, this is an election year and as we get closer to November, it will begin to garner more attention. Next week in our Weekly Market Commentary, we will discuss the election in more detail, but today we wanted to share a very interesting connection between the stock market and election.
Turns out, since 1928, the stock market has accurately predicted the winner of the election 87% of the time and every single year since 1984. It is quite simple. When the S&P 500 Index has been higher the three months before the election, the incumbent party usually won, while when stocks were lower, the incumbent party usually lost.
“Think about it; no one expected Hillary Clinton to lose back in 2016, no one except the stock market that is,” explained LPL Financial senior market strategist Ryan Detrick. “The Dow had a 9-day losing streak directly ahead of the election, while copper (more of a President Trump infrastructure play) was up a record 14 days in a row, setting the stage for the change in party leadership in the White House.”
As shown in the LPL Chart of the Day, as we get closer to the election, how stocks are doing could signal who might win in November.
Ryan Detrick is senior market strategist for LPL Financial.