How Does the Economy Decide an Election? - Eva Marder

It may be difficult to associate the victor of America’s presidential race with the jumbled decimals and graphs of the stock market. I am here to break down how those details favor a win for one candidate. The task of determining the next United States president comes down to the stock market’s performance in the three months leading up to the election. The incumbent party typically wins when stocks are higher, while the opposition party tends to take the gold when stocks are lower. In the incumbent president’s final stride to uplift the stock market within ninety days of the election, businesspeople look to market indexes to gauge their approval of each candidate. Despite market volatility before an election, speculators will generally disapprove of the incumbent if they have failed to erect the stock market by the end of their term. In other words, businesspeople are asking themselves, If the market is down, what will the same president do differently to bring it up?

According to the head of policy research at Strategas Research Partners Dan Clifton, the S&P 500 has predicted every presidential election winner since 1984 (Fitzgerald, CNBC). The S&P 500 is a stock market index that every aspiring entrepreneur or investor should familiarize themselves with. It measures the stock performance of the 500 largest companies listed in United States stock exchanges like the New York Stock Exchange and the NASDAQ.

You may be wondering, Is the economy always right? The answer is no. However, the same question concerns other election indicators like polling. Let us take a look back at the 2016 presidential election. The night of the election, the S&P fell more than five percent in premarket trading as states were predicting an unlikely win for Republican candidate Donald Trump. Time exposed a similar fault line in the polls. Forecasters gave Clinton a seventy to ninety-nine percent chance of winning. This error occurred thanks to projections in chief battleground states that gauged few uneducated voters. Ultimately, Donald Trump walked away with the election by winning in areas with lower levels of education. Hence, polling is not always the best method of detecting the next president. However, in a pandemic-era depression, the stock exchange may not be the top indicator either. Neither polls nor Wall Street will give you the answer to America’s political scrimmage, but the stock market remains a crucial election benchmark for entrepreneurial spirits.

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