One metric has accurately predicted the outcome of every presidential election since 1984 — the strength of the SP 500 Index.
And right now, the SP 500 is pointing to a Donald Trump victory on Election Day.
“Going back to World War II, the SP 500 performance between July 31 and October 31 has accurately predicted a challenger victory 86% of the time when the stock market performance has been negative,” Sam Stovall, chief investment strategist at CFRA, told CNBC.
When stocks are going up, the incumbent party tends to win the White House. But the SP 500 is down 2.2% since the last trading day of July.
Republican presidential candidate Donald Trump pumps his fist in the air during a campaign rally at the Collier County Fairgrounds on October 23, 2016 in Naples, Florida. Early voting in Florida in the presidential election begins October 24. (Photo by Joe Raedle/Getty Images)
US Republican presidential candidate Donald Trump speaks at a rally at The Champions Center Expo in Springfield, Ohio, on October 27, 2016. (Photo credit PAUL VERNON/AFP/Getty Images)
Donald Trump, 2016 Republican presidential nominee, speaks during the 2nd annual Roast and Ride hosted by Senator Joni Ernst, a Republican from Iowa, not pictured, in Des Moines, Iowa, U.S., on Saturday, Aug. 27, 2016. Ernst, who in 2014 won the Senate seat vacated by Democrat Tom Harkin when he retired, has turned her Roast and Ride into the conservative answer to the Harkin’s legendary Steak Fry fundraiser, which auditioned dozens of presidential candidates over its 37-year history. (Photo by Daniel Acker/Bloomberg via Getty Images)
Republican presidential candidate Donald Trump speaks to supporters at a rally on September 12, 2016 at U.S. Cellular Center in Asheville, North Carolina. Trump criticized Democratic rival Hillary Clinton for saying that half of his supporters belong in a ‘basket of deplorables.’ (Photo by Brian Blanco/Getty Images)
Republican presidential candidate Donald Trump speaks during a campaign rally, Sunday, Oct. 30, 2016, in Las Vegas. (AP Photo/ Evan Vucci)
Republican presidential candidate Donald Trump speaks during a town hall, Thursday, Oct. 6, 2016, in Sandown, N.H. (AP Photo/ Evan Vucci)
Republican presidential candidate Donald Trump speaks to supporters during a campaign rally, Saturday, Oct. 29, 2016, in Golden, Colo. (AP Photo/ Brennan Linsley)
Still, this election has hardly abided by historical standards. And the downturn in the stock market could actually be a result of election anxiety.
“This time around if the Democrats retain the White House, I will come up with two responses,” Stovall told CNBC. “One is that history is a guide but never gospel, and two, the negative performance by the market could be a reflection of the worry of domination that a Democratic sweep would bring.”
As Business Insider’s Elena Holodny noted this week, when it comes to markets, the past does not predict the future.
Daniel Clifton at Strategas Research Partners gave Business Insider additional context about this indicator earlier this year:
“Intuitively, this trend makes sense. If the economy is weakening, stocks should be declining and the incumbent party will likely suffer. Moreover, should it look like a new party is to take control of the White House, the change in control could add uncertainty to investors until the new President gets his or her rhythm.”
“In fact, we have found that ‘open’ election years, a year in which no incumbent is up for re-election have been tougher for stocks than presidential reelection and non-presidential election years. Interestingly, stocks have rallied in the past two (and rare) instances when a political party has received a 3rd term.”
“The SP 500 increased 30 and 27% respectively in the year after Harry Truman won in 1948 and George H.W. Bush won in 1988. Sometimes the devil you know is better than the devil you don’t know.”
Other unconventional indicators have also indicated a Trump win on November 8.
An artificial intelligence system that has correctly predicted the past three presidential elections as well as the Democratic and Republican primaries said Trump will likely win, and a professor who has accurately predicted the outcome of every presidential election since 1984 came to the same conclusion last month based on a model he developed that uses a series of true/false statements to determine who is best positioned to take the White House.
And after the FBI announced that it’s reopening its investigation related to Clinton’s use of a private email server during her time at the State Department, the polls started tightening, putting Trump within striking distance of Clinton.
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