• The stock market can help predict the winner of the presidential election.
• Since 1928, the S&P 500 has been 83% accurate in predicting election results.
• The most important indicator to watch is the performance of the S&P 500 in the three months leading up to the election.

The stock market can be used to predict who will win the presidential election in November.

According to Adam Turnquist, LPL’s chief technical strategist, the S&P 500 has had an 83% accuracy rate in predicting which political party will win the White House since 1928.

“While polls, betting odds and forecasts can provide valuable insight into potential election outcomes, the data can be distorted. To avoid this noise and potential distortion, keep an eye on how the market is developing,” Turnquist said in a note on Thursday.

In particular, he emphasized that the performance of the stock market in the three-month period before election day is the key indicator of who will win the presidency.

This important phase officially began on Monday of this week.

“Since 1928, whenever the S&P 500 was positive in the three months before an election, the incumbent party retained control of the White House 80 percent of the time,” Turnquist said.

For example, the S&P 500 lost 24.8 percent in the three months before the 2008 elections. Ultimately, the Democrats won, and President Barack Obama ended Republican dominance in the White House after eight years.

Conversely, this meant that the incumbent party lost the election 89 percent of the time when the stock market recorded a negative return in the three months before the election.

For example, the S&P 500 lost 2.3 percent in the run-up to the 2016 presidential election and President Donald Trump ultimately led the Republican Party to victory, ending Democrats’ control of the White House after eight years.

In total, this stock market rule correctly predicted 20 of the last 24 elections, giving an overall accuracy rate of 83%.

However, the market can also be wrong. The 2020 presidential election is a prime example of this.

The S&P 500 rose 2.3% ahead of the 2020 election, but the incumbent party led by President Donald Trump lost the election to President Joe Biden.

Even if the stock market forecast for the November elections is not perfect, it is worth keeping an eye on.

Although the S&P 500 has fallen by about 0.5 percent since the start of the three-month election window on Monday, making the Republicans the favorites in November, there are still 88 days until the Americans vote.