An analysis of the stock market’s performance leading up to the United States presidential election has shown a historical trend of predicting the outcome of the race. Since 1928, the S&P 500 has accurately pointed to the winner in 20 out of 24 elections. This year, with less than two weeks to go until Election Day, the market is up 11.8 percent since early August, indicating a potential victory for Vice President Kamala Harris. However, the relationship between the stock market and the economy is not as clear-cut as it may seem.
Despite the stock market’s positive performance, a large segment of voters does not have exposure to it, and many Americans still view the economy as “bad”. This sentiment is driven by concerns about rising prices and the cost of living, even as inflation has begun to stabilize. While wage growth has outpaced inflation, the gap between wages and prices is not expected to close until 2025.
Additionally, the unpredictability of modern politics adds another layer of complexity to interpreting the stock market’s predictive powers. The 2020 election, which saw Joe Biden defeat incumbent President Donald Trump, was not accurately forecasted by the market. With Trump challenging conventional wisdom and the political landscape constantly shifting, the stock market may not always be a reliable indicator of election outcomes.
As voters head to the polls, they will need to weigh a variety of factors beyond the stock market and consider the broader economic and political landscape as they decide the future direction of the country.
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