by Terresa Monroe-Hamilton | November 1, 2016 1:50 pm
According to historical stock market trends, there is now an 86% chance that the next president will be… Donald Trump. That rings true with me. The market is very worried about the Democrats dominating the House, Senate and the Presidency. With Comey coming forward last Friday and reopening Clinton’s email scandal, that particular set of worries has been pushed back. In the polls, the candidates are virtually tied. In one poll out of LA, Trump is now ahead four points. And I don’t think the email scandal has really been factored in accurately yet. As much as Trump is disliked, I don’t see how he can lose now to Clinton the corruptocrat. But who knows?
When the market has been higher in the same period, the incumbent party has won 82 percent of the time since World War II. The exceptions have been 1968, when there was a third-party challenger, George Wallace, and in 1980, when the third-party candidate was John Anderson. Gary Johnson is the third-party Libertarian candidate this year. His numbers are now below five percent, so I don’t see Gary Johnson as much of a factor this go-around.
The stock market’s election year performance between July 31 and Oct. 31 has often accurately predicted the next president — and this year it’s pointing to a victory by Donald Trump, if history is a guide.
Sam Stovall, chief investment strategist at CFRA, says the market’s decline this fall has been a bad omen for the incumbent party and Hillary Clinton, who still holds a six point national lead in a new poll. The S&P 500 is down 2.2 percent since its close of 2,173 on July 29, a Friday and the last trading day of July.
“Going back to World War II, the S&P 500 performance between July 31 and Oct. 31 has accurately predicted a challenger victory 86 percent of the time when the stock market performance has been negative,” he said. The one time in eight that the incumbent party won with a negative stock market was in 1956, when Adlai Stevenson challenged President Dwight D. Eisenhower.
If you can believe it, Clinton is still favored. But those odds are slipping fast and the polls have not just tightened, they have turned in Trump’s favor. When market performance over the three months leading up to election day have been negative, there has never been a victory by the incumbent party going back to 1984. So far, the S&P 500 is down about 2.5 percent since Aug. 8th, three months before the election on Nov. 8th. That doesn’t guarantee Trump anything, but it is a pretty strong indicator.
Last Friday’s bombshell from the FBI was indeed a black swan event. We still have a few days before the election and one more bomb dropped on Clinton will put her down for good. All Trump has to do is not step in it before election day. Next week should be full of surprises.
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