If you judge based on the polls, President Trump is going to suffer a resounding defeat on election day. If, on the other hand, you look at the indicators that have presaged the outcome in previous elections, not only is that outcome not ensured, it’s wrong. Consider this observation by Paul Brandus at MarketWatch:
Here’s the research, and it is compelling: Since 1928, whenever the S&P 500 Index SPX, -0.69% 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.
In meting out its punishment, the markets have proven to be agnostic. In three of those six instances, Republicans lost. In the other three, Democrats did.
The late Sen. Pat Moynihan’s advice is out-of-date. Now everybody has their own facts. Now go back and re-read my earlier post today. Not only may both sides think they are going to win, they may think that the only explanation for their failure to win is cheating by the other side. That sets the stage for violence more than at any time since the American Civil War.