Stock Market Secrets: Can the S&P 500 Predict the Next President?

 

Curious about who will win the US presidential election in November? Just ask the stock market!
 
Forget about polls, analyses, and debate results—just ask the US stock market! Financial experts in the US believe that the ultimate predictor is the S&P 500 stock index, which includes a large group of American and global companies. Since 1928, it has successfully predicted the election winner with more than 80% accuracy.

How does it work?

 

The trick is to watch the index three months before election day (August, September, and October). If the index's average performance is positive, it suggests that the ruling party will remain in power. On the other hand, if the S&P average is negative during this period, it indicates that the ruling party will lose, implying that the stock market is not pleased with the administration's performance.

Take 2008, for example. After the S&P 500 dropped more than 20% in the three months before the elections, Democrat Barack Obama won, ending eight years of Republican rule.

 

Before his re-election in 2012, the index was rising, signaling that the financial markets were satisfied with his performance. Similarly, before the 2016 elections, the S&P dropped, resulting in Republican Donald Trump's victory, ending the Democrats' term in office.

This rule has been accurate in 20 of the last 24 elections, with only four misses—one of which was in 2020, when despite a slight rise in the index, Trump lost to Joe Biden.

So, will the stock market's prediction be right this time? The countdown has begun, so keep your eyes on the markets!