This stock market metric says the likely winner is…Trump

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.

Stovall said in that year, Britain and France joined with Israel in a military action against Egypt over the Suez Canal. It was also the year of the Hungarian Revolution.

“This time around if the Democrats retain the White House, I will come up with two responses. One is that history is a guide but never gospel, and two, the negative performance by the market could be a reflection of the worry of domination that a Democratic sweep would bring,” said Stovall.

The market had been concerned about the possibility that Democrats would take the House of Representatives, but on Monday, after new revelations about an FBI probe into emails of a Clinton staffer, those worries were pushed into the background.

Stovall said when the market has been higher in the same period, the incumbent party 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.

Source: This stock market metric says the likely winner is…Trump

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