Stock Market Index Has an 83% Success Rate in Calling the Presidential Election

As it turns out, the S&P 500 index is a pretty good indicator of who will win a presidential election. How good? Well, according to an article over at CNBC.com, the price action of the S&P between August 1 and October 31 of election years since 1944 has accurately predicted the November winner in 15 of the last 18 elections; that���s 83% of the time.

Specifically, a review of the behavior of the S&P 500 during these periods reveals that when the market rises during this period, the party that is in office will win the November election, and when the market declines during these periods, the party that is on the outside, looking in at the Oval Office will triumph.

In one sense, understanding the connection between a robust stock market in the months preceding a presidential election and the sitting party retaining control in November���or, conversely, the relationship between a faltering market and the contending party prevailing���is not difficult to understand. To many, the stock market is the economy, as untrue as that actually is, and so, if it is doing well, the ���snapshot��� impression a lot of folks have is that the economy is going along swimmingly, and what better perception to have from the electorate if you���re the incumbent party, going into November?

Right now, then, things look pretty good for Hillary Clinton, if one wishes to refer to this ���indicator��� for predictive guidance. The market has been sailing along here recently, due in no small way to the fact that investors are reasonably satisfied that interest rates will not be going up any time soon, and certainly not by any significant amount. An ���easy��� monetary policy is typically a stock market���s best friend, and with no rate increase in the offing, the expectation is that the market will continue to move upward, thus allowing many voters to persist in their notions of a thriving economy.

By Robert G. Yetman, Jr. Editor At Large