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How Stocks Predict Presidential Elections

Despite many news worthy headlines in 2020, this is also an election year.  As we get closer to November, the election will begin to garner more attention and trigger client discussions on how to best position accounts.  We have often talked about how stock markets are viewed as a leading indicator for what’s to come. We came across an interesting connection between the stock market and presidential elections this morning while reading research from Ryan Detrick, a Senior Market Strategist at LPL.

Here is Ryan's research:

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.

Ryan cites the stock market's losing streak preceding Hillary Clinton’s attempt to hold onto the presidency for her incumbent party as the most recent example of this measure getting things right.

The clock starts ticking in early August.

Questions about this research or how to best prepare yourself?  We'd love to chat! 

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