The stock market has correctly predicted who will win the presidency since 1984. Here's what to look for as we approach the November election.
- The stock market has a solid track record of predicting the winner of the US presidential election, according to LPL Financial.
- Since 1984, the S&P 500 has correctly predicted the outcome of every presidential election based on its price movements in the three months leading up to the election.
- And since 1928, the S&P has correctly predicted the next US president 87% of the time.
- As we approach the November election, investors should keep an eye on the stock market for clues about whether President Donald Trump or former Vice President Joe Biden will win.
- Visit Business Insider's homepage for more stories.
Since 1984, the stock market has correctly predicted the winner of each US presidential election, according to Ryan Detrick, a senior market strategist at LPL Financial.
And going back to 1928, the S&P 500 has correctly predicted the winner 87% of the time.
How can investors use the S&P 500 to better understand whether President Donald Trump or former Vice President Joe Biden is most likely to win the election on November 3?
By following the price movements of the market in the three months leading up to the election.
"When the S&P 500 has been higher the 3 months before the election, the incumbent party usually won, while when stocks were lower, the incumbent party usually lost," Detrick said in a note published on Monday.
In 2016, very few expected Trump to beat Hillary Clinton — except for the stock market.
"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," Detrick said.
The three elections where the stock market incorrectly predicted the winner of the presidential election were:
- In 1956, when the incumbent, Dwight D. Eisenhower, was reelected despite the S&P 500 falling 3.2% in the three months before the election.
- In 1968, when the incumbent lost to Richard Nixon despite the S&P 500 rising 6% in the three months before the election.
- In 1980, when the incumbent lost to Ronald Reagan despite the S&P 500 rising 6.9% in the three months before the election.
Investors who are keen on presidential politics should keep a close eye on the stock market in the three months leading up to the November 3 election.
