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President Donald Trump’s prospects of a second term in the White House would appear to be fading — fast.
However, at least one measure of a U.S. election outcome continues to indicate that the incumbent has a better-than-average shot of winning in 2020 against Democratic challenger and former Vice President Joe Biden.
The S&P 500 stock index’s performance in the three-month period ahead of Election Day, which is Nov. 3 this year, has proven accurate over the past nearly four decades. The equity-market performance measure has been the best predictor of U.S. presidential elections since 1984, proving 87% accurate since 1928, LPL chief financial market strategist Ryan Detrick notes.
The return for the S&P 500 index SPX, -0.17% over the past three-month period thus far is more than 7% since Aug. 3, as it rebounds from a powerful swoon induced by the economic carnage wrought by the COVID-19 pandemic.
Meanwhile, the Dow Jones Industrial Average DJIA, -0.16% has climbed 8.2% so far during that period and the technology-laden Nasdaq Composite Index COMP, -0.09% has climbed by nearly 9%.
This isn’t the first time that Detrick has rolled out this stock-performance index but it comes as Biden’s lead in national polls against Trump has only widened with about three weeks left before the crucial election.
Biden leads Trump by 10.2 percentage points, 51.8% to 41.6%, according to an average of national polls from RealClearPolitics. However, an RCP poll of so-called Battleground states, which are usually important to the outcome of the presidential election race, Biden leads by a more modest, but still considerable, 4.8 percentage points, 49.4% to 44.6%.
In the past, Detrick has said that it’s worth believing that this time the stock index could be wrong but warns that investors should at least ready for the potential of the unexpected.
