Posted: 30 Oct 2020 02:06 PM PDT
If you’re handicapping the election, our pal Sam Stovall’s
August-October Market “Presidential Predictor” closed in the red today. When
the S&P is lower from July 31 to October 31 in election years it is not a
great sign for an incumbent presidential party win.
However, as long as we have an expeditious decision on the
winner, the market has generally rallied November-December no matter the winner.
When incumbent parties win S&P 500 is up only 0.07% on average in November
and 1.7% in December. When they lose S&P 500 is up 1.5% in November and
1.1% in December.
Since 1936 when the S&P 500 is up from the July 31 close
to the October 31 close in election years the incumbent party wins 85% of the
time (11 of 13). When the S&P is down over this three-month span the party
in control of the White House has changed 88% of the time (7 of 8).
Two misses were likely due to significant third-party
candidates derailing reelections in 1968 (Wallace) and 1980 (Anderson).
Eisenhower was reelected in 1956 despite the bear market caused by the Suez
Crisis/Sinai War in October-November 1956 and Soviet tanks rolling into Hungary
to quell the revolution in October 1956.