By LPL Research

One of the top requests we’ve had here at LPL Research is for more charts on the election. Over the next week, we will share some of our favorite charts on this very important subject.

Here’s how the S&P 500 Index performs under various presidents and congressional makeups. The best scenario has historically been a Democratic president and Republican Congress, while a Republican president and Democratic Congress has been the weakest.

View enlarged chart.

Building on this, a split Congress historically has been one of the best scenarios for investors.

View enlarged chart.

The best scenario under a Republican president is a split Congress, a potential positive for 2020 that has played out after the massive reversal in the stock market since March.

View enlarged chart.

Looking at the four-year presidential cycle shows that stocks haven’t been down during a year the president was up for a re-election since FDR in the 1940s, another bullish tailwind for 2020.

View enlarged chart.

Here’s another look at this, as stocks historically have done much better when there isn’t a lame-duck president.

View enlarged chart.

How stocks perform three months before the election has a stellar track record of predicting who will win in November. If stocks are higher, the incumbent party tends to win, while if stocks are lower, the incumbent party tends to lose. This indicator accurately predicted the winner 87% of the time (20 of 23) since the late 1920s.

View enlarged chart.

Building on this, if President Donald Trump is going to win, right about now is when the S&P 500 Index should start to outperform. Of course, if it weakens, it could mean we will be looking at a President Joe Biden soon.

View enlarged chart.

Speaking of presidents up for re-election, here’s what the S&P 500 historically has done during re-election years.

View enlarged chart.

Lastly, here are two final charts that may help forecast the outcome.

If real per capita disposable income is higher, the incumbent president usually wins. Conversely, if wages are weak, that bodes well for someone new in the White House. Given real per capita, disposable income is up more than 7% this year, it would suggest President Trump should take more than 70% of the votes. Of course, this is greatly skewed due to the CARES Act, so we’d put a major asterisk next to this one.

View enlarged chart.

To sum up, Gallup poll approval ratings have done a nice job of predicting how many votes a president up for re-election might get. With a 42% Gallup approval rating currently, this comes out to 49% of the total votes for President Trump, which points to a close race.

For more of our thoughts on the election, please watch our latest LPL Market Signals podcast below.

 

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

  • Not Insured by FDIC/NCUA or Any Other Government Agency
  • Not Bank/Credit Union Guaranteed
  • Not Bank/Credit Union Deposits or Obligations
  • May Lose Value