Source: Joe Hoft
Per a study developed in 2012, President Trump has an 87% chance of winning the 2020 election right now based on the current standings of US stock markets.
The US stock markets today closed again at all-time highs. Yahoo Finance reported:
The S&P 500 and the Nasdaq hit an all-time high on Tuesday, while the Dow declined amid mixed economic news and decline in heavy weights like Exxon Mobil and Boeing.
The Dow Jones Industrial Average (DJI) gave up 60.02 points, or 0.2%, to close at 28,248.44 and the S&P 500 added 12.34 points, or 0.4% to close at 3,443.62. The Nasdaq Composite Index closed at 11,466.47, adding 86.75 points, or 0.8%. The fear-gauge CBOE Volatility Index (VIX) decreased 1.5%, to close at 22.03. Declining issues outnumbered advancing ones for 1.45-to-1 ratio on the NYSE and a 1.07-to-1 ratio on the Nasdaq favored advancers.
How Did the Benchmarks Perform?
Both the S&P 500 and the Nasdaq closed at all-time highs on Tuesday. While the broader index marked its 17th record close in 2020, the tech-laden Nasdaq log its 38th record finish of this year.
Yes, the S&P 500 and the Nasdaq hit all-time highs, but the bigger news may be that the Dow closed at 28,248.
This is because a study at the Socionomics Institute which shows the stock market is the key indicator in elections:
The stock market is a more powerful presidential reelection indicator than GDP, inflation and the unemployment rate combined. That was the key finding of a 2012 paper by our team at the Socionomics Institute.
Specifically, we found that the net percentage change in the stock market in the three years leading up to Election Day had a significant correlation with the incumbent’s margin of victory or defeat. The market’s net percentage changes over the one, two and four years prior to the election were weaker, but still significant, reelection indicators.
Our study examined every presidential reelection bid going back to George Washington’s run for a second term in 1792. Regardless of whether we studied elections from the 18th, 19th, 20th or 21st centuries, the stock market remained a reliable, powerful and significant indicator of presidents’ fates at the ballot box.
You might think that the results indicate that voters vote their pocketbooks — or at least their portfolios. But we found differently. Almost no one owned stocks in the 1700s, 1800s or even early 1900s, yet the stock market remained a reliable reelection indicator. We used Robert Prechter’s socionomic theory to explain our results.
The theory proposes that waves of social mood regulate the ups and downs in the stock market as well as other social attitudes and actions, such as the propensity to retain the leader. As social mood becomes more positive, society sends stock prices higher and becomes more inclined to reelect the leader, and vice versa. Thus social mood, not the stock market per se, regulates society’s inclinations to keep the incumbent or throw the bum out.
The Dow Jones Industrial Average was 23,377 three years prior to Election Day 2020. Applying the above finding to the current election, President Trump will be a mild favorite to win if the Dow is between 23,377 and 28,052 when Americans go to the polls, and he will be a strong favorite if the market is above 28,052. Joe Biden will be a mild favorite to win if the Dow is below 23,377, and he will be a strong favorite if the market is below 22,208.
See below picture from Socionomics Institute:
Today the DOW closed over 28,052 at 28,248. Based on this President Trump has a better than 87% chance of winning the 2020 election as the markets now stand.
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