As the 2024 election nears, Wall Street, political gamblers, and cryptocurrency traders are ramping up bets that former President Donald Trump could return to the White House. But the S&P 500 index — a longtime election predictor — tells a different story. Historically, a rising S&P 500 ahead of Election Day favors the incumbent party, suggesting that Vice President Kamala Harris, now leading the Democratic ticket, might be positioned for victory.
S&P 500’s Historical Role as an Election Indicator
U.S. stocks have surged since August, with the S&P 500 climbing over 10%, a movement often seen as a bellwether for the election outcome. The index has been remarkably predictive, correctly forecasting the winning party in 20 of the last 24 presidential races, according to data from LPL Financial. If the index rises in the months leading up to Election Day, the incumbent party’s candidate typically wins. However, a dip suggests uncertainty and the likelihood of a new administration taking over.
Adam Turnquist, chief technical strategist at LPL Financial, shared insights on this pattern. “The market’s making a call for Harris to win,” he stated, noting that investors often find comfort in the stability that comes with an incumbent victory. This year, the S&P 500’s upward trend seems to favor the Democrats, despite rising bets elsewhere on a Trump win.
Election Betting Markets and Trump’s Popularity Surge
Public sentiment around the election remains tense, with people eagerly eyeing polls, betting odds, and a slew of non-traditional indicators. Betting markets currently lean toward a Trump victory, and billionaire investor Stanley Druckenmiller recently cited increased activity in bank stocks, crypto prices, and Trump Media shares as indicators of confidence in a Trump comeback. Trump Media & Technology Group, for instance, has seen its stock rise over 200% since last month’s low.
Political science professor Justin Grimmer from Stanford University believes these betting patterns reflect the nation’s anxiety. “People are just naturally going to feel anxiety,” he remarked. “All of these things, I think, are ways for people to try to relieve this anxiety they have about this election.”
Wall Street’s Divided Views on the Market as an Election Forecast
Despite the historical reliability of the S&P 500 in election years, many Wall Street experts caution against relying on the index as a predictor. Monica Guerra, head of U.S. policy at Morgan Stanley Wealth Management, remains skeptical. “The market is no crystal ball,” she told POLITICO, noting that tech stock gains and Federal Reserve actions may be driving this year’s rally rather than election factors. Meanwhile, Trump has publicly claimed that his return would further lift stock prices.
While Guerra emphasizes caution, LPL Financial’s Turnquist points out the surprising accuracy of the S&P’s historical trend. In 2016, the index fell 2.3% before Trump’s unexpected victory, indicating a change was coming. “You were laughed at for even thinking about it,” Turnquist said, reflecting on that year’s outcome. “But the market was right.”
Trump-Friendly Stocks on the Rise
Beyond betting markets, certain sectors also appear to anticipate a Trump win. Morgan Stanley recently highlighted a “Republican basket” of stocks that include energy firms, banks, and crypto companies — industries that could benefit from a Republican administration. This basket outperformed a “Democratic basket” by 10% over the past year, hinting that investors are hedging their bets in case of a Trump victory.
Reena Aggarwal, a finance professor at Georgetown University, expressed doubts about the market’s predictive strength, pointing out the modern-day disconnect between stock performance and the broader economy. “The market and the broader economy — there’s a disconnect,” Aggarwal said, adding that today’s index is heavily weighted by tech giants rather than traditional industrial firms. The result, she suggests, may make it harder to gauge the economy’s true alignment with electoral outcomes.
Will the S&P 500’s Election Streak Hold in 2024?
Despite mixed signals, the S&P 500’s record in predicting elections remains notable, but experts warn that market trends aren’t foolproof. Grimmer explains that while historical patterns offer insights, they are not definitive. “You can only use history so much,” he cautioned. “We’re just going to have to wait and find out. It’s a coin flip.”
This year’s election remains exceptionally tight, with conflicting indicators underscoring the divided sentiment across Wall Street and beyond. With both betting markets and the stock market tracking different paths, the ultimate outcome will rest with voters. As polling day approaches, investors, political analysts, and the public alike will be watching closely to see if the S&P 500 continues its predictive streak or if this election will defy historical trends.
