Does the Market Indicate Who Might Win?
Friday, June 14, 2024
Our friends at LPL Research posted an interesting chart on the LPL Research blog.
The top panel on the chart is the Standard & Poor’s 500 Index (aka the S&P 500). The second panel is from Predictit, an online event prediction market which allows individuals to bet on whether an event will or will not occur (basically a betting site).
It's important to be politically aware and exercise our right to vote...
One offering on the Predictit “marketplace” reflects the odds for who will win the Presidential Election in November. The red line in the second panel reflects the odds that Trump will win, and the black line reflects the odds that Biden will win.
The right side of the graph shows that the current race is a toss-up, but notice that Trumps chances have been trending up since April, and Biden’s chances have been trending down. The third panel is the statistical correlation of movement in the S&P 500 with the movement in Trumps election odds. The green upward sloping area implies that the stock market moved up as Trumps odds increased.
Likewise, the fourth panel reflects the negative correlation between the S&P 500 and Biden’s odds of winning the presidency. The implication from these charts is that investors tend to be buyers rather than sellers as the odds of a Trump victory improve. This study was done before the recent guilty verdict in Trump’s New York trial, but I checked the Predictit site and the odds haven’t changed noticeably. This post belongs in the “interesting” file.
The implication from these charts is that investors tend to be buyers rather than sellers as the odds of a Trump victory improve.
We, at Riverfront, are not making investment decisions for our clients based on this information. It is important to be politically aware and exercise our right to vote, but history convinces us that the stock market is much more sensitive to inflation and economic growth than it is to political polls.
Source: LPL Research, Bloomberg. PredictIt.org 03/07/24
Disclosures: Past performance is no guarantee of future results.
(The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.)
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