So who will win the US election scheduled for November 5, 2024? Against the backdrop of the intense battle between Joe Biden and Donald Trump, the stock market has proven to be a reliable indicator in the past.
Recent research from prominent prediction markets shows that odds on President Joe Biden’s chances of being re-elected vary widely, from less than 38% to 76%.
Economists have given Trump a 45% chance of winning and Biden a 44% chance of winning.
How to predict public opinion polls
To gain insight into alternative indicators, Mark Hulbert conducted an analysis covering a variety of economic, financial, and sentiment measures. The analysis included the U.S. stock market, real GDP, the Conference Board’s Consumer Confidence Index, and the University of Michigan Consumer Sentiment Survey, focusing on changes so far in the year leading up to Election Day.
Among these indicators, only the stock market showed a significant correlation with the incumbent party’s likelihood of victory, and this correlation was statistically significant at the 95% confidence level.
Analysis predicts Joe Biden victory
His findings show a clear relationship between the year-to-date performance of the stock market and the likelihood that the current administration will remain in office. He shows that historical data dating back to the creation of the Dow Jones Industrial Average in 1896 supports this correlation.
Based on this historical correlation and the Dow’s current year-to-date stock-only gain of 5.6%, President Biden has a 58.8% chance of being re-elected. If the stock market moves further up or down by Election Day, these odds will be adjusted accordingly.
Halbert argues that even discounting the ambiguity of electronic prediction markets, it’s hard to argue that their track record beats that of the stock market. Limited sample sizes prevent establishing statistically significant patterns. For example, the Iowa Electronic Market (IEM), one of the oldest forecasting instruments, dating back to 1988, has a track record of only nine presidential elections.
