Sunday, August 2, 2020

Why the Democrats will win the 2020 presidential election and why the stock market will fall in the next 3 months

I'm back and ready for a little bit of a predictions.   After studying the US GDP numbers since 1927 and Presidential election results, the following rules tend (83 percent of the time - 19 out of the last 23 elections) to apply:

1. If the (calendar year) GDP rises from the third to fourth year in a Presidential Administration, the political party in power stays in power in the White House. The exception was 1968, where the GDP rose from 2.7 in 1967 to 4.9 in 1968. The Democrats lost the White  House.


2. If the (calendar year) GDP drops from the third to fourth year in a Presidential Administration or if the Calendar year GDP is negative in the third or fourth year of  Administration in power the political party in power loses the White House. The exceptions were 1944, 1948 and 1956. 

Below are the results:

1928: The GDP rises from 0.6 (1927) to 1.2 in 1928. The Republicans stay in power

1932:  The GDP in 1932 was -12.9 (it was also negative in 1931). The Republicans lose White House to Democrats

1936: The GDP rises from 8.9  (1935)  to 12.9 in 1936. The Democrats stay in power

1940: The GDP rises from 8.0  (1939)  to 8.8 in 1940. The Democrats stay in power

1944:  The GDP drops from 17.0  (1943)  to 8.0 in 1944. The Democrats should have lost but did not

1948:  The GDP in 1947 was -1.1 (it was positive in 1948 at 4.1) The Democrats should have lost but did not

1952:  The GDP drops from 8.0 (1951) to 4.1 in 1952. The Democrats lose the White House to the Republicans

1956:  The GDP drops from 7.1  (1955)  to 2.1 in 1956. The Republicans should have lost the White House  but did not

1960:  The GDP drops from 6.9 (1959)  to 2.9 in 1960. The Republicans lose the White House to the Democrats

1964:  The GDP rises from  4.4  (1963)  to 5.8 in 1964. The Democrats stay in power

1968:  The GDP rises from 2.7  (1967)  to 4.9 in 1968. The Democrats should not have lost but did. Republicans take the White House

1972:  The GDP rises from 3.3  (1971)  to 5.3 in 1944. The Republicans stay in power

1976:  The GDP in 1975 was -0.2 (it was positive in 1976 at 5.4). The Republicans lose the White House to the Democrats

1980:  The GDP drops from 3.2  (1979)  to -0.3 in 1980. The Democrats lose the White House to the Republicans

1984:  The GDP rises from 4.6 (1983)  to 7.2 in 1980. The Republicans stay in power

1988:  The GDP rises from 3.5 (1987)  to 4.2 in 1988. The Republicans stay in power

1992: The GDP in 1991 was -0.1 (it was positive in 1992 at 3.5). The Republicans lose the White House to the Democrats

1996:  The GDP rises from  2.7  (1995)  to 3.8 in 1996. The Democrats stay in Power

2000:  The GDP drops from 4.8  (1999)  to 4.1 in 2000. The Democrats lose the White House to the Republicans

2004:  The GDP rises from 2.9 (2003)  to 3.8 in  2004. The Republicans stay in power

2008: The GDP drops from 1.9 (2007) to  -0.1 in 2008. The Republicans lose the White House to the Democrats

2012:  The GDP rises from 1.6 (2011)  to 2.2 in 2012. The Democrats stay in power

2016:  The GDP drops from 2.9 (2015)  to 1.6 in 2016. The Democrats lose the White House to the Republicans


This brings us to 2020. In 2019 the GDP was 2.3. So far the GDP is about -18.0 with a projected -5.0 rate for all of 2020. This tells us there will be a political party change (well at least an 83 percent chance) in the White House. While I don't have the numbers, I remember reading that in a Presidential Year if the Stock Market drops from August 1st to October 31st, the Political Party in the White House will lose the White House.  The last time this did not work was 1980.

With that reasoning that the Political Party in Power now will lose, then this means the stock market from August 1st to October 31st will fall. The Dow Jones is at 26,428. It will be less than that number on October 31st.



5 comments:

  1. A rising stock market tends to be a ratification of the present policies being satisfying to the investing public.” — Julian Emanuel, chief equity and derivative strategist at BTIG
    Here’s the research, and it is compelling: Since 1928, whenever the S&P 500 Index (SPX) of the largest U.S. stocks has risen in the three months prior to a presidential election, the party that controlled the White House won 90% of the time.

    Three months prior to election day (Nov. 3), the S&P 500 was at 3,271 points. It’s over 3,500 today, a gain of 7%. Based on Emanuel’s study of history, Trump is better positioned to win a second term than pollsters or the media seem to think.

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  2. Aug 3rd S&P 500 3,271 points.
    0ct 14 S&P 500 3,488 points.

    ReplyDelete
  3. Aug 3rd S&P 500 3,271 points.
    Oct 28 S&P 500 3,333 points.
    Aug 1st Dow 26,428.
    Oct 28 Dow 26,900

    ReplyDelete
  4. A late bounce trimmed a decline for the S&P 500 on Friday, the last trading day of October, but it wasn’t enough. The index finished the day down 40.15 points, or 1.2%, to close at 3,269.96, leaving it below the July 31 close at 3,271.12.

    “The Presidential Predictor implies, but does not guarantee, a Biden victory,” Stovall said, in an email, after the closing bell.

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  5. long the same concept, Ryan Detrick, chief financial markets strategist at LPL Financial, has look backed at the market’s performance in the three month period ending on Election Day going back to 1928. That period this year runs from Aug. 3 to Nov. 3.

    It’s also on track to signal a Biden victory. The S&P 500 would need to finish above the Aug. 3 close of 3,294.61 to turn it in favor of Trump.

    ReplyDelete