by Chris Becker
Talk about a Hobson’s choice!
From “The End of the American Dream” blog, via ZH:
If you want Donald Trump to win the election, then you should be rooting for a stock market crash between now and November. As you will see below, if stocks go up during the last three months before an election, the incumbent party almost always keeps the White House. But if stocks go down during the last three months before an election, the incumbent party almost always loses.
Yesterday, Trump warned Americans to get out of the stock market, and if his warning turns out to be correct it will likely benefit him politically as well. When the general population believes that things are going well, Americans tend to stick with current leadership, but when the general population believes that we have hit rocky times they are usually ready for a change.
It turns out that this very strong correlation between the direction of the stock market and the outcomes of presidential elections goes all the way back to before the days of the Great Depression. The following comes from Zero Hedge…
Since 1928, there have been 22 Presidential Elections. In 14 of them, the S&P 500 climbed during the three months preceding election day. The incumbent President or party won in 12 of those 14 instances. However, in 7 of the 8 elections where the S&P 500 fell over that three month period, the incumbent party lost.
The last time this correlation failed was back in 1980, and at that time Americans were feeling depressed about the country for other reasons. Overall, the stock market has predicted the outcome of presidential elections with 86 percent accuracy, and that is way too strong of a correlation to ignore. Just consider the gains or losses that we have seen for the S&P 500 during the last three months prior to each election since 1928 and the outcomes of those elections…
1928: 13.6 percent gain – incumbent party won
1932: -2.6 percent loss – incumbent party lost
1936: 7.9 percent gain – incumbent party won
1940: 8.6 percent gain – incumbent party won
1944: 2.3 percent gain – incumbent party won
1948: 5.4 percent gain – incumbent party won
1952: -3.3 percent loss – incumbent party lost
1956: -2.6 percent loss – incumbent party won
1960: -0.7 percent loss – incumbent party lost
1964: 2.6 percent gain – incumbent party won
1968: 6.5 percent gain – incumbent party lost
1972: 3.0 percent gain – incumbent party won
1976: -0.1 percent loss – incumbent party lost
1980: 6.7 percent gain – incumbent party lost
1984: 4.8 percent gain – incumbent party won
1988: 1.9 percent gain – incumbent party won
1992: -1.2 percent loss – incumbent party lost
1996: 8.2 percent gain – incumbent party won
2000: -3.2 percent loss – incumbent party lost
2004: 2.2 percent gain – incumbent party won
2008: -19.5 percent loss – incumbent party lost
2012: 2.5 percent gain – incumbent party won
As you can see, the only times the correlation broke down were during the years of 1956, 1968 and 1980.
But this is a very strange year. We have never seen a candidate like Donald Trump before, and the establishment is pulling out all of the stops in an effort to derail his march to the White House. So the normal rules may not apply this time around.
Stock markets obviously would prefer Hillary Clinton so expect a rally going into the election if the Trumpster’s poll numbers keep declining. We can only hope!