Analysts S&P Global Market Intelligence conducted historical research and calculated that the victory of a candidate in the presidential election in the United States in recent decades is almost always anticipate the investor sentiment in the course of several months before the voting day. This is with reference to the report S&P reports CNN Money.
The basis of the estimates of the experts took the variation of the index “the wide market” S&P 500 (quotes 500 largest U.S. companies) beginning with the election of 1944, the first since the formation of the company, the S&P in its current form. For the study was taken as the last three full months before the election, from July 31 to October 31. In 2016, the opening exchanges on Monday fell on 1 August.
In 82% of cases, if the S&P 500 index during the period under review grew, the ruling party retained power. On the contrary, if the index has declined in 86% of cases the President is the candidate from the opposition. The explanation is simple: if the economy expands, the flash crash, the voters agree with the current course of Washington, in the opposite case the Americans demand a new administration.
From the investigated 17 election campaigns only in three cases we observed an exception to this rule. So, in 1956, the market went down amid the Suez crisis in the middle East, but President Dwight Eisenhower retained his post. In 1968 and 1980 the Democrat President succeeded a Republican despite the growth of the market: the reason is, according to experts, have become strong candidates from “the third force” who picked up the favorites of the race part of the electorate (George Wallace and John Anderson, respectively).
This time, analysts warn S&P, the forecast can also be inaccurate because the solid support of the candidate of the libertarian party’s Gary Johnson. According to the survey by CNN/ORC in mid-July, ready for him to cast their votes, 13% of Americans. The same number of voters voted in 1968 for Wallace’s ultra-conservative, which provided him victory in five southern States.
Currently, the S&P 500 index is near historic highs. After a significant fall at the end of June (in the background of a referendum on British exit from the EU) quotes quickly recovered and went up. As at the end of Friday’s trading day, 29 Jul, S&P 500 has stayed at around 2173,6 points.