For almost 100 years, 87% of the time, S&P 500 Index has given an exact prediction of the US presidential election, stated by Dan Clifton, strategist of Strategas Research Partners, on Thursday at a BNY Mellon webcast.
US presidential elections drawing nearer
In the 3-month time before the November 2020 presidential election, if stocks become higher than they were at the start of the year, the existing party will have a greater chance of winning. But, if they were lower, the opposition will likely take the White House, Business Insider reported.
Right now, the race is considered very tight. On Wednesday, the S&P 500 hit high record but has since declined by around 7%, which left it with a year-to-date gain of only 3.7%. the most recent data showed the economy was recovering but at an ever-crawling pace.
Clifton articulated this year's four transformational events, the Covid-19 pandemic, mass protest against racial injustice, an ensuing recession, and the US presidential election have posed a big challenge to possible outcomes of this year's presidential election.
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According to Clifton, from the past century, he can only see three of the instances ever happening in just a year, and it only happened three times, adding that what happened to 2020 is an extraordinary situation, with an intensified range of outcomes.
Moreover, Clifton said not everyone who's declaring they know what will happen are being honest, adding that it is still very important for investors to for the possible different scenarios.
Mail-in ballots may be Dems' downfall
According to a report in The Economist, in case that the validity of the 2020 presidential election will be challenged by the losing party, confirming the results could be released as late as mid-December, a timeframe to consider ahead of the critical deadline of tax of December 31.
Clifton uttered the next two months are expected to be the wildest days in politics and come up with a 3-point framework to be aware of the potential outcomes. These are understanding the effects of COVID-19 pandemic in the economy, establishing the mood in key swing states.
When the caseload of Covid-19 increased, there was a referendum on US President Donald Trump. But as the Covid-19 cases came to ahead, it became more of a choice between Trump and Joe Biden.
A conventional presidential election could happen if Covid-19 has been controlled, but if it comes breaking out in September and October the moment students go back to school, a referendum on Trump would likely not help for his re-election process, Clifton articulated.
Clifton mentioned the Gallup Approval Rating to watch on the multi-day polls as it is linearly related to the percentage of votes to be received by a president during an election.
The race for the presidential election is tightening due to the recovering economy of the country. A third-quarter GDP growth rate of 29.6% has been predicted by the Atlanta Fed's GDP model, which is higher than the previous estimate of 28.5%,
Clifton emphasized that the fastest growth rate ever experienced before a US election was 6.2%, which indicates that current projections are around five times the average rate.
The Democrats could end up losing the 2020 elections if they decide to vote through mail-in ballots, as this process is expected to suddenly escalate the chance of error and delays the entire procedure.
Biden winning the 2020 presidential election with a win probability at about 55% has been forecasted by Strategas, which means that Trump has a 45% chance of winning that is a closer race than what polls suggest.
