Joe Biden will win, says stock market indicator that has correctly called every presidential election since 1984

Did Wall Street just predict the next President?
Photo by Noam Galai/Getty Images

In a nail-biter finish that went down to the last few minutes of the last day, one of the stock market’s most reliable election indicators just signaled its prediction for who will win the 2020 presidential election: By just six-tenths of a percentage point, it’s Joe Biden.

The so-called Presidential Predictor, which is based on how the S&P 500 performs in the final three months before an election, has correctly called 20 out of the last 23 presidential winners, for an 87 percent accuracy rate, and has gotten the next occupant of the White House right in every presidential election year since Ronald Reagan won a second term in 1984. “It’s not a statistically significant sample, as any statistician would tell you,” says Sam Stovall, chief investment strategist for CFRA. “But it has real merit because it tends to accurately reflect how much investors dislike uncertainty.”

The way the indicator works is simple: If stocks, as measured by the S&P, move higher in the three full months before a presidential election, the incumbent party tends to stay in office. If stock prices instead fall from August through October, the party that’s been out of office typically wins.

Why does it work? LPL Financial chief market strategist Ryan Detrick explains it this way: “Maybe Wall Street can sense there is change in the air and this leads to uncertainty over what the new leadership might look like, so there is selling. Compare this when markets feel comfortable with the incumbent party winning, as they likely know what to expect based on the previous four years.”