A note from LPL, the largest independent broker-dealer in the United States on using the stock market as a prediction tool for the US election.
The S&P 500 index has historically been a strong predictor of U.S. presidential election outcomes, with an 83% accuracy rate since 1928.
The indication comes from the stock market's performance in the three months leading up to an election as an indicator of which political party will win the White House.
- A positive S&P 500 performance in the three months before the election has resulted in the incumbent party retaining the presidency 80% of the time.
- Conversely, a negative return in that period has led to the incumbent party losing 89% of the time.
- This pattern has correctly predicted 20 out of the last 24 elections.
- However, there have been exceptions, such as in 2020 when the S&P 500 rose but the incumbent party lost.
As of now, the S&P 500 is slightly down since the three-month window began, suggesting Republicans as the current favorites, though there are still many days before the election.
