The Stock Market Will Tell You the Election Winner

The intersection of politics and stocks... Short-term and long-term thinking... The 'presidential election' indicator... A good track record... Watch the next three months... The second half of the recession that never was... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The intersection of politics and stocks... Short-term and long-term thinking... The 'presidential election' indicator... A good track record... Watch the next three months... The second half of the recession that never was... --------------------------------------------------------------- This year, I (Corey McLaughlin) want to get to this idea early... We no doubt are going to hear much more about the presidential election in the months ahead. The scene now: Donald Trump, days removed from surviving an assassination attempt, is now the betting favorite to win in November. Meanwhile, calls for sitting President Joe Biden to drop out of seeking a second term are growing. Those began in earnest after a brutal debate performance last month and picked up just yesterday with more Democrats in Congress actually putting their names on the stance. As we've said here recently, who actually wins the White House tends to matter less for the long-term returns of the stock market than you might think... even if one party ends up controlling the executive and legislative branches in a "sweep." Market results have been [even under a unified Democratic or Republican government]( since 1926. The market has returned an annual average of precisely 14.52% in 13 years of "full" Republican government and 34 years of Democratic control. But that does not mean politics can't influence the market in the short term... For instance, I contend that over the past few weeks, investors have been increasingly betting on a Trump win/policies. Another example that we recently covered is the ["blue wave" winners]( that Whitney Tilson – now the lead editor of Stansberry's Investment Advisory – had recommended back in 2020. Our colleague Dan Ferris has also written before about how elections can be "tradeable events." As Dan wrote a few years ago about the night of the 2016 election... Futures for the benchmark S&P 500 Index melted down about 5% as it became clear Trump was winning states everybody thought Democratic nominee Hillary Clinton would win. Likewise, the Mexican peso futures melted down 10% or so (if memory serves)... since everyone knew Trump didn't like the North American Free Trade Agreement and wanted to renegotiate the agreement. By the next morning, though, the S&P 500 losses were gone... I remember someone posting on Twitter: "Best. Crisis. Ever." Politics tend to stoke volatility, too, which can benefit prepared investors – like those who use our Dr. David "Doc" Eifrig's favorite options-trading strategy. And perhaps the most telling relationship between presidential elections and stocks is what the latter can tell us about the former... based on how the stock market does in the months before November in an election year. The 'presidential election' indicator... I can't tell you with any certainty who will win in November. However, as the calendar gets closer and closer to Election Day, I do know someone who has a good track record. He's called "Mr. Market"... specifically, the S&P 500. Look at how stocks perform in the next few months – starting in 14 days, to be precise. As we noted back in a September 2020 edition of the Digest (and my predecessor Justin Brill similarly wrote about four years earlier in another presidential-election cycle)... Over the last four decades, the S&P 500's performance in the three months prior to Election Day has accurately predicted who wins in November every time. And since 1928, this indicator has been accurate more than 85% of the time. It's true. Here are the details... If the S&P 500 is up from July 31 to October 31, it tends to favor the incumbent president or party that controls the White House winning again. If the U.S. benchmark index is down in the three months before November, often the incumbent president or party loses. That definitive period kicks off in just two weeks. Here's the historical precedent for this indicator... In the 23 presidential elections since 1928, 14 were preceded by gains in the three months prior. In 12 of those 14 instances, the incumbent (or the incumbent party) won the White House. Conversely, in eight of the nine elections preceded by three months of stock market losses, incumbents were sent packing. This was the case in 2020, by the most razor-thin of margins. From July 31, 2020, to October 31, the S&P 500 lost a slim 0.04%. And, perhaps appropriately, the election result was slim in Biden's favor (and contested by Trump). In any case, this indicator was again "right" about the election result, as it has been about every one since 1984. Why? Well, as we wrote four years ago... If we had to guess, we'd say that the forward-thinking stock market prefers the predictability of one party staying in charge of the White House, and that the sentiment is reflected in months-long stretches of positive (or negative) returns in the S&P 500 ahead of Election Day. I still say that's the case. If investors have an inkling that certain policies might change come November, they will be adjusting expectations in the months before Election Day. But there's also another factor to consider: whether a recession has occurred under the current president. The recession factor... Since 1932, an incumbent president has never failed to win reelection unless a recession has occurred during his time in office. That's also what we had in 2020, albeit briefly amid the COVID-19 panic. This makes some sense because if voters are upset with the economy, they want change. Whether that change works or is "right" is another story. In most cases, the answer is simply "more spending." Anyway, right now, while you don't hear much about it in the mainstream financial media, we could be on the brink of a recession. The unemployment rate has ticked up in each of the past four months. Today, weekly jobless claims hit 243,000, nearly a one-year high. The Federal Reserve is now signaling interest-rate cuts to come because it sees the economy weakening. Central bank officials haven't said it quite that plainly, but job losses are picking up. Of course, though, even the simple definition of "recession" has become muddied. Back in the first half of 2022, the U.S. economy saw two straight quarters of negative GDP growth. That's a "technical" recession, though the powers that be did their best to convince everyone a recession wasn't happening because the unemployment rate was so low. But that was mainly because the COVID stimulus effect was still influencing a lot of things in the economy. So you could argue we have seen a recession in Biden's term. Plus, the unemployment rate is now rising, but GDP growth remains positive. So, if current trends continue... we could consider this the second half of the recession that never was but was, in a sense, happening all along the way. Either way, I suspect the stock market will tell us something soon... I'm not so sure formal definitions matter as much as sentiment about the economy, and both might matter by November. Firstly, if we do have a recession (and I'm not predicting it, just putting it on the table as a possibility), stocks are due for a fall yet. As our Stansberry's Credit Opportunities editor Mike DiBiase has [pointed out before]( stocks tend to "bottom" during or after recessions, not before. And as Mike wrote [earlier this year]( most recessions have begun only after the Fed starts cutting rates. The way things are going with the Fed's favorite data, economists won't declare an "official" recession until later this year at the earliest, if at all. But that doesn't mean stocks couldn't start a leg lower from all-time highs before then. Today, with all of the major U.S. stock indexes down (including the small-cap Russell 2000 Index for a second straight day) and oil prices up, it's easy to say this might be afoot right now. One or two days doesn't make a trend, but we'll keep watch. Second, if stocks have a negative return after July 31 through October 31, history suggests the challenger (Trump) will win the White House. If the S&P 500 finishes higher during that span, history says it's likely that the incumbent president (or his party, a potentially important note this year) will win again. There will be short-term trades to be made based on these expectations, but they'll tend not to matter as much over the long run. Because then there's this... While reading a few things today that we wrote back in 2020 about the election, I found this, from [our November 2, 2020 edition](... As we've said for the better part of this year, it doesn't matter if the winner is declared on Tuesday, Wednesday, or sometime in early 2021. Whenever it happens, our editors expect a few things to play out no matter what in the years ahead... Namely, more government spending. It's the one thing that the two major parties agree on... Even if more spending is for different reasons (and the federal deficit has risen 435% in the last four years alone), the result and troubling effect on the value of a U.S. dollar is the same (as is the benefit for "hard" investments like gold and bitcoin). ... the folks in Washington aren't even trying to hide their feelings anymore. The future, they say, is somebody else's problem. More spending, no matter what happens. That's still a good bet. As Dan wrote [earlier this year](... At least as far as your portfolio is concerned, neither candidate will do anything but maintain the status quo – like all those before them. No matter who the next president is, he'll borrow, tax, and spend, and the government will grow. Thus the importance of inflation protection, be it through shares of high-quality stocks that will reward you in any economic environment, or "hard assets" like gold. Which brings me to our quote of the week... This is from President Harry S. Truman, himself the target of an assassination attempt back in 1950. The would-be assassins, a pair of Puerto Rican pro-independence activists, killed a White House police officer in the plot but never reached Truman. Anyway, I was reading the 25th-anniversary update to Nick Murray's classic book, Simple Wealth, Inevitable Wealth, on long-term investing that just came out this month. Early in the book, Murray highlights a quote from Truman: "There is nothing new in the world except the history you do not know." Frankly, I'm not sure this sentiment is entirely accurate. There are new ways that history can repeat. Truman himself was responsible for the decision to use an atomic bomb as a weapon of war for the first time, against Japan in 1945. But the point is that history seems to rhyme enough that the past can shed light on the potential future. That goes for elections, stocks, and spending. Watch how the market performs in the months ahead for clues about who the next president will be... and protect your nest egg from inflation no matter what. --------------------------------------------------------------- Recommended Links: # [NOW AIRING: The New 'Smart Money' AI Trade]( ONE money move could have grown your money by 1,000% in less than a year... and it doesn't involve trading options, cryptocurrencies, or anything highly speculative. But according to one Wall Street legend, it could also save your wealth from being destroyed as a totally unexpected story plays out. Watch the unveiling (airing right now), and hear critical updates for Tesla and Nvidia, [at this private link](. --------------------------------------------------------------- # [Wall Street Legend Who Called the 2008 Housing Crisis Warns: 'Get Out of Cash Now']( He predicted just about every major stock market crash of the 21st century – from the dot-com crash of 2000 to the 2008 housing bust. Now, the man CNBC nicknamed "the Prophet" is urging Americans to get out of cash. He warns, "A dramatic event is headed for the U.S. stock market in the coming weeks. The moves you make with your money today could dictate the next decade of your financial life." [Here's why, plus a free recommendation with 500%-plus upside potential](. --------------------------------------------------------------- New 52-week highs (as of 7/17/24): American Express (AXP), Berkshire Hathaway (BRK-B), Colgate-Palmolive (CL), Electronic Arts (EA), Enstar (ESGR), Diamondback Energy (FANG), Intercontinental Exchange (ICE), JPMorgan Chase (JPM), Kinder Morgan (KMI), Coca-Cola (KO), Lockheed Martin (LMT), Grand Canyon Education (LOPE), Altria (MO), Novartis (NVS), Omega Healthcare Investors (OHI), Procter & Gamble (PG), Rithm Capital (RITM), Roper Technologies (ROP), SPDR S&P 600 Small Cap Value Fund (SLYV), S&P Global (SPGI), SPDR Portfolio S&P 500 Value Fund (SPYV), ProShares Ultra Financials (UYG), Waste Management (WM), Consumer Staples Select Sector SPDR Fund (XLP), and Health Care Select Sector SPDR Fund (XLV). In today's mailbag, one thought about the "Great Rotation," the subject of [yesterday's edition](... What's on your mind? As always, e-mail us at feedback@stansberryresearch.com. "The rotation would explain why my top performing share, which I bought on 25th June, was 20.41% profit [on Tuesday], but is now just 18.66% profit now... If the entire market [or sector] has dropped because of 'rotation' then it's not a problem with the specific ticker codes but is a case of 'a rising tide raises all boats' and the equivalent 'a falling tide descends all boats', where the blame here is on the tide not the boat. Until I read the mailing, I thought maybe the ticker code was at fault." – Subscriber Richard A. All the best, Corey McLaughlin Baltimore, Maryland July 18, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios. Returns represent the total return from the initial recommendation. Investment Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,417.0% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,413.3% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 908.0% Extreme Value Ferris WRB W.R. Berkley 03/16/12 770.0% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 690.1% Retirement Millionaire Doc HSY Hershey 12/07/07 479.6% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 460.1% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 436.6% Retirement Millionaire Doc NVO Novo Nordisk 12/05/19 389.1% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 368.5% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,606.5% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,168.0% Crypto Capital Wade MATIC/USD Polygon 02/25/21 764.7% Crypto Capital Wade AGI/USD Delysium AI 01/16/24 336.0% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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