This market phenomenon states that there is an 86% chance that Trump could win the elections. It’s the economy stupid were Bill Clinton’s famous words that helped in land the White House. Nothing has changed since then and history indicates that if the markets don’t fare well before the elections the incumbent party tends to lose. What counts the most is the market’s performance three months prior to the elections. When the market climbs, the incumbent party wins and when it declines the incumbent party loses. We have had a total of 22 elections since 1928 and the market trended higher in 14 of those elections. The incumbent party won the White House in 12 out the 14 times. The market also dropped in 8 of those elections and the incumbent party lost in 7 out of instances. This indicator was wrong in only three instances, illustrated in the table below courtesy of Zerohedge.com. This gives this stock market indicator an astounding accuracy of over 86%.
Once again, we have even more evidence that this election is going to be an action-packed event before and after the elections. Moreover, uncertainty leads to panic and rapid reactions and such reactions create opportunities. Remember that the Fed is stuck between a hard place and a Grenade. If the markets are allowed to crash then, the illusion of economic stability is shattered. Moreover, this is not something the Fed can afford for this dream is working to a great extent; the world still believes the US dollar is the best currency to hold. If that illusion is shattered, foreigners could panic and dump the USD.
As we stated before from an investment perspective, a Trump win would create a better opportunity. However, we are not in the election calling business, so we are not going to attempt to call these elections. What we can tell you is that Social media as a source of news is exploding; this is why we worked so hard to build a significant social media presence. We spotted this trend earlier and knew that this would be the best place to gather real-time sentiment data. Social media outlets are almost all ranking Trump higher than Hillary.