Since 1984, the accuracy rate has been 100%! Can the trend of the US stock market predict the outcom

US presidential election polls

After the presidential debate between Vice President He Jinli and former President Donald Trump, the election poll has again become a hot topic. Currently, He Jinli has a slight advantage in multiple polls. The New York Times shows that He Jinli's victory rate is 49%, while Trump's is 47%; Project FiveThirtyEight and ABC data show that He Jinli's winning rate is 47%, compared with 44.3% of Trump's. On Polymarket, the world's largest forecast market, the odds of He Jinli and Trump being elected are the same, both 49%.

Although election polls are the primary way of predicting elections in most countries, recent analysts have pointed out that for the United States, monitoring changes in the stock market may be more accurate in predicting election results.

Stock market predicts election results

According to a report by Fortune magazine. The accuracy of election polls is actually not stable. Nathaniel Rakich, a senior election analyst at FiveThirtyEight, reviewed hundreds of US election polls since 1998 in 2023 and found that the accuracy of the polls was only 78%, and in 2022, this data even dropped to 72%.

Relatively speaking, the performance of the S&P 500 index from August to October has been more accurate in predicting the results of the US presidential election since 1984. Data shows that in recent years, there have been 10 US presidential elections, and when the blue chip index rises during this period (August to October), the ruling party always wins; When the S&P 500 falls, it indicates that the opposition party will win.

The data shows that the S&P 500 index has maintained a slight increase since August this year.

Comerica Bank's Chief Investment Officer John Lynch and Senior Analyst Matthew Anderson explained in a client report the correlation between the stock market and election results:

The stock market performance reflects overall economic sentiment. When voters are satisfied with the direction of the economy, they tend to support the current government, and when they are dissatisfied, they are more likely to vote for change

However, Lynch and Anderson pointed out that although the strong stock market performance throughout the election year is closely related to the ruling party's victory, victory is not guaranteed every time. For example, in 1976 and 1980, despite the S&P 500 rising 14.1% and 13.4% respectively, the ruling party still suffered electoral defeats, both years facing high inflationary pressures.

Another noteworthy election prediction indicator

John Lynch and Matthew Anderson believe that economic sentiment is one of the main reasons why stock market performance is related to the ruling party's election results, so there is another election prediction indicator worth paying attention to: the Pain Index.

The pain index is a combination of seasonally adjusted unemployment rate and annual inflation rate, which is designed to measure the economic pressure of ordinary Americans. The higher the index value, the greater the pain that consumers experience in terms of rising prices and employment difficulties.

Since 1980, the three-month moving average of the Pain Index from August to October has accurately predicted the results of presidential elections. When the index drops, the ruling party usually wins; When the index rises, it indicates that the ruling party will be defeated.

The latest pain index for August is 6.73%, which is lower than the Biden administration's high of 12.66% in July 2022, but slightly higher than June's 6.57%.

John Lynch and Matthew Anderson stated: