This stock-market metric has correctly predicted presidential election results since 1984

Market Watch:

A simple equity-market chart has been the best predictor of U.S. presidential elections since 1984, proving 100% accurate—and is 87% accurate since 1928.

The LPL analyst says that a chart of the S&P 500’s performance in the three-month period ahead of Election Day, which is Nov. 3 this year, has proven accurate over the past nearly four decades.

The 2020 election race between incumbent President Donald Trump and former Vice President Joe Biden is a coin toss, LPL financial chief market strategist Ryan Detrick says.

Indeed, a number of polls and betting odds indicate that a once-yawning lead enjoyed by Biden is starting to wane. Real Clear Politics shows that the Democratic nominee is leading Trump by 6.2 percentage points, based on an average of national polls, and his advantage in so-called battleground states, stands at a relatively razor-thin margin of 2.7 percentage points, according to a separate RCP poll average.

The S&P gauge currently shows that since Aug. 3, the S&P 500 SPX, -0.73% has returned nearly 7% (see attached chart). Meanwhile, the Dow Jones Industrial Average DJIA, 0.08% has climbed over 7% and the Nasdaq Composite Index COMP, -1.89% has surged more than 9%.

CAVEATS …

All that said, Detrick said that Trump is still contending with an even bigger factor that could stymie his re-election chances beyond the stock-market gains: a recession.

“History has shown that when a recession has occurred during the two years before the election, the incumbent president has tended to lose,” the analysts wrote.

“ In fact, the economy incredibly has predicted the winner of every presidential election going back to President Calvin Coolidge,” he added.

That statistic also offers its own inherent caveat since the recession that ensued in this pandemic is a global one and occurred a stunning and historic rate.

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