US election: Stock market drops big hint on whether Donald Trump or Joe Biden will win

With one day to go until the US Presidential election, a shift in the stock market has given a key indication of who is going to win.

The S&P 500 indicator has fallen 0.04 per cent in the period between July 31 and October 31.

The result means that the market is forecasting the Democratic nominee, Joe Biden, will win the election, beating current US President Donald Trump on Tuesday (Wednesday NZT), according to CFRA Research’s Presidential Predictor.

The stock market has a reliable track record of predicting whether an incumbent is likely to be voted out.

Since World War II, there’s an 88 per cent likelihood the US president will be voted out when the S&P has fallen in the three months leading up to the presidential election, according to CNN.

Conversely, when the S&P 500 sees a rise over the same period, the president has been re-elected 82 per cent of the time.

Previously, the stock market had favoured Trump to win the election – but on Friday the S&P 500 fell 1.2 per cent. The fall sent stocks into negative percentage points and, according to the analysis, gives a hair-thin margin to Biden.

“This year, the Predictor closed ever so slightly in the red during this three-month period, implying, but not guaranteeing, that Biden will emerge victorious,” Sam Stoval, the chief investment strategist from CFRA, told CNN.

The S&P 500 is a stock market index that measures the stock performance of the 500 large publicly listed US companies.

The prediction matches other forecasts from Wall Street, including an analysis from Goldman Sachs which predicted a “blue wave” of support for Democrats, giving the party control over the House of Representatives and the Senate.

“Such a blue wave would likely prompt us to upgrade our forecasts,” Jan Hatzius, chief economist from Goldman Sachs, wrote last month. He said Democrat control of the House and Senate would release stimulus funds which could be positive for the market.

Strategists from JPMorgan wrote in July of this year they believed a Biden win could be neutral to positive for the markets.

“The consensus view is that a Democrat victory in November will be a negative for equities. However, we see this outcome as neutral to slightly positive,” said Dubravko Lakos-Bujas, who led the team’s research.

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