…What are markets telling us about the election?
…The three months preceding the election are a crucial time. According to the presidential election cycle theory, when the market rose from July 31 to October 31, the incumbent party has tended to win the presidency and when the market slumped, it’s the challenging party that’s been victorious.
Look at the 2016 election as an example. Polls strongly favored Hillary Clinton, the incumbent party’s nominee, but Mr. Market had other ideas. The S&P 500 fell 1.7 percent in the three months leading up to Election Day, and the challenging party’s nominee, Donald Trump, won the White House.
Since World War II, this trend has had a 72 percent win rate. Put another way, investors have accurately “voted” for the winning candidate roughly three out of every four times and, if we exclude the 2000 election (even though I label the S&P as being up for the three-month period, it was in reality essentially flat at 0.18 percent), the win rate increases to 78 percent, or one-in-five.
How is Trump’s reelection bid looking so far, according to Mr. Market? As of August 12, the market was up more than 3 percent since July 31, close to its all-time high. It will be interesting to see if the trend remains intact.
Editor’s Note: The original article by Frank Holmes has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.
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In a recent interview with Chris Wallace of Fox News when asked if he would accept defeat in an election. His response: “I will tell you at the time. I’ll keep you in suspense, OK?”
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