Topline
Stocks’ Tuesday bounce concluded a solid stretch of gains heading into the election, securing a historically accurate stock market predictor for a Vice President Kamala Harris victory, though recent counterexamples potentially cloud the prognostication.
A trader works the floor of the New York Stock Exchange in 2017.
AFP via Getty Images
Key Facts
All three leading U.S. indexes rallied Tuesday: The benchmark S&P 500 rose 1.2%, the tech-concentrated Nasdaq gained 1.4% and the Dow Jones Industrial Average climbed 1%, or 430 points.
Tuesday was the best percentage gain for the S&P and the Dow since Sept. 19 and the Nasdaq since Oct. 8.
The rally means the S&P jumped a robust 11.5% in the three-month stretch leading up to Election Day, with that three-month performance of the S&P a crucial period for the presidential election, according to analysis from LPL Financial’s chief technical strategist Adam Turnquist.
In the 24 elections from 1928 to 2020, the incumbent party’s presidential nominee won 12 of 15 elections (75%) when the S&P gained ahead of Election Day and lost eight of nine contests (89%) when the index fell, meaning the S&P correctly frontrun 20 of the last 24 elections (83%), according to Turnquist.
But two of the three instances in which an incumbent lost during a stock market boom are particularly stinging for Harris, as they include 2020, in which her now-opponent Donald Trump failed to secure a second consecutive term, and 1968, which was previously the last time a sitting, one-term president was not his party’s nominee, as Lyndon B. Johnson stepped aside for his vice president, Hubert Humphrey.
Tangent
This is the best three-month stretch for the S&P ahead of an election since 1928, according to Turnquist. That was an election in which Republican Herbert Hoover defeated Democratic nominee Al Smith in a landslide, but those gains came just months before the 1929 stock market crash.
Contra
Poll-based prediction models give Harris and Trump almost exactly even odds to become the next president, but the burgeoning election betting market slants in Trump’s direction. The Election Betting Odds tracker, which aggregates odds across five platforms including Kalshi and Polymarket, gives Trump a 58% chance of winning as of 4 p.m. EST on Tuesday.
Surprising Fact
The administrations of Trump and President Joe Biden both oversaw better-than-average stock markets. The S&P returned 82% from Election Day 2016 to Election Day 2020 and 73% from Election Day 2020 through Tuesday, according to FactSet data.
What We Don’t Know
How Wall Street will react to election results. Strategists largely agree avoiding a scenario in which either Democrats or Republicans sweep the presidency and both chambers of Congress will be a boon for equity prices as it may prevent some profit-unfriendly policies like Trump’s tariffs or Harris’ increased corporate tax rates from becoming law. The S&P has gained an average of 1.5% over the last 10 elections from Election Day through the end of the calendar year, according to CNBC, which noted returns were typically stronger following tightly contested races like 2024’s.
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