The stock market made its prediction on the winner

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the S&P 500 (SPX) fell 0.04% between July 31 and October 31. That means the market forecast – by a hair – that Joe Biden is going to win, according to CFRA Research’s Presidential Predictor.

The stock market has a fairly reliable track record: since World War II, when the S&P 500 fell in the three months before the November vote in a presidential election year, the incumbent president or the incumbent president’s party has lost. the election 88% of the time.

Likewise, when the S&P 500 rises during this period, the incumbent or the incumbent president’s party wins 82% of the time.

The stock market had predicted a Trump victory until Friday, when the S&P 500 fell 1.2%. It was just enough to send negative actions over the past three months, which gave Biden the edge.

“This year the Predictor has closed very slightly in the red during that three-month period, which implies, but does not guarantee, that Biden will emerge victorious,” said Sam Stoval, chief investment strategist at CFRA.

Bet on a blue wave

The Presidential Predictor matches Wall Street forecasts. Goldman Sachs analysts predict a “blue wave,” in which Democrats take over the White House and Senate and retain control of the House of Representatives. Goldman thinks this could be a positive outcome for the markets.

“Such a blue wave would likely cause us to upgrade our forecast,” Goldman Sachs chief economist Jan Hatzius wrote in a report last month.

Goldman Sachs (GS) wrote that a blue wave “would greatly increase the likelihood” of a fiscal stimulus package of at least $ 2 trillion soon after the Jan. 20 launch. The company also cited Biden’s longer-term spending plans on infrastructure, climate, health care and education.

Taken together, these expenses “would at least correspond to the longer-term likely tax increases on corporations and top earners,” Goldman Sachs wrote.

Likewise, JPMorgan strategists led by Dubravko Lakos-Bujas noted in July: “The consensus is that a Democratic victory in November will be a negative for stocks. However, we view this result as neutral to slightly positive.”

President Donald Trump has repeatedly predicted that Democrats would decimate the U.S. economy and that the stock market would crash if they won in November.

But Moody’s Analytics found that Biden’s economic proposals, if passed, would create 7.4 million more jobs than Trump’s. The economy would return to full employment in the second half of 2022, almost two years earlier than under Trump’s plan, Moody’s said.

A survey of CEOs conducted by the Yale School of Management in late September found that 77% of attendees would vote for Biden. Over 60% predicted he would win. However, a UBS survey of 500 business owners and 1,000 investors conducted in mid-October found that 55% of business owners wanted Trump to win, while 51% of investors supported Biden.

Predict the outcome

A CNN poll shows Biden with a sizable lead nationwide as of October 28, and close to the 270 electoral votes needed to secure victory.

No incumbent has ever won a second term in a recession in the two years leading up to the election, according to data from RiverFront Investment Group.

The only incorrect prediction from the CFRA’s presidential predictor when the market fell in the three months leading up to the election was in 1956, when incumbent President Dwight Eisenhower defeated Adlai Stevenson despite a 7.7% drop in the stock market during the crisis. de Suez and the Hungarian uprising.

It’s unclear what, if any, this outlier could mean for Trump. The market has been declining for the past three months largely due to an increase in coronavirus cases. Trump’s handling of the pandemic is largely unpopular, although some might also view the wave of Covid-19 infections as beyond his control. Trump still scores relatively high among voters for his economic record despite the recession.

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