With three weeks to go, President Trump’s re-election bid is in trouble. At least that’s what the polls show.
But it’s not what the stock market is signaling. Based on nearly a century’s worth of election-year data, Trump may yet win.
“A rising stock market tends to be a ratification of the present policies being satisfying to the investing public.” — Julian Emanuel, chief equity and derivative strategist at BTIG
Here’s the research, and it is compelling: Since 1928, whenever the S&P 500 Index (SPX) of the largest U.S. stocks has risen in the three months prior to a presidential election, the party that controlled the White House won 90% of the time.
“If you think about it intuitively, it makes sense,” says Julian Emanuel, chief equity and derivative strategist for the investment firm BTIG who compiled the data. “Because a rising stock market tends to be a ratification of the present policies being satisfying to the investing public.”
History lines up squarely behind Emanuel. In 1928, for example, President Calvin Coolidge, a Republican, chose to retire, but stocks rose between August and November. It was the last full year of the Roaring ’20s and helped lift the new GOP standard bearer, Herbert Hoover, into the White House.
Four years later, the reverse occurred. The Great Depression, which began in the fall of 1929, dragged down stocks — including between August and November 1932 — and Hoover was crushed by Democrat Franklin D. Roosevelt.
In fact, there have been six presidential years since 1928 when the S&P 500 fell in the three months before election day. All six times, the party in the White House lost.