This year, the Hillary Clinton-Donald Trump contest proved to be unique. It is well known that the market's course between July 31st and October 31st has been a consistent but not fool-proof predictor on who will triumph the election.
When the market is up during those three months, eighty percent of the time the incumbent party wins and when it's down, voters upkeep a conversion. This pattern proved to be reliable since the Roosevelt-Dewey race during 1944.
As of now, S&P 500 toppled about 1.9 percent since the end of July. If this drop holds through Oct. 31, the market would indicate a win for Trump. However, there are two of the three cases when the market forecast was mistaken. It was during 1968 and 1980 when a third party candidate was involved.
Having Libertarian Gary Johnson and Jill Stein of the Green Party both running for president, this could certainly create a huge wave of doubt to the predictive powers of the market this time around.
There is also a big question mark whether Trump can prevail given the disapproval of the minorities. Given that the 26 percent of the registered voters are Republicans and 29 percent for Democrats, Trump needs an almost impossible percentage to offset the loss. Furthermore, 42 percent of the electorate are independents, the highest ever polled, and a key factor in this year's election.
To have a shot at winning, Trump needs majority of independents. But now, with the announcement of lewd video and subsequent multiple accusations of sexual misconduct, Trump's hope for winning now appears to have all but vanished.
Having all these factors, even if the stock market stays negative for August, September and October, it appears to be decided in Clinton's favour.
According to investors, hospital stocks will have a bright future but the opposite to pharmaceutical and biotech stocks when a Clinton presidency happens. Infrastructure and defence stocks will still be strong given that they appear to be beneficiaries of bigger expenditure regardless of who takes office.
"Clinton is a known commodity, and that makes markets comfortable. Plus, the economy appears to have more room to run in 2017, so the stock market should follow," said Debra Silversmith, the chief investment officer of First Western Trust in a commentary.
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