We said it a few weeks ago but it is hard to believe that it is July and only July at the same time. Looking back at the tail end of 2019, you could not help but think the biggest disruption in 2020 was likely going to be the presidential election. In 2016, when we first started the Weekend Word, it was all we could find to write about. Here we are four short years later on the precipice of the election and it is almost an afterthought with all that is going on. The markets might not feel the same way though.
Since 1928 the markets have been able to predict the winner of the election 87% of the time. It isn’t all that complicated either. Basically, if the S&P 500 is up the three months leading up to the election, the incumbent party typically won. If it was lower, then typically the challenger won.
“Think about it; no one expected Hillary Clinton to lose back in 2016, no one except the stock market that is,” explained LPL Financial senior market strategist Ryan Detrick. “The Dow had a 9-day losing streak directly ahead of the election, while copper (more of a President Trump infrastructure play) was up a record 14 days in a row, setting the stage for the change in party leadership in the White House.”
Now obviously this is far from scientific, and given the pandemic things are quite a bit different than they otherwise may be, but with four months left before the election it will be interesting to see if the market can put Nostradamus to shame.