The stock market has been issuing early hints at President Joe Biden winning a reelection in 2024. With the S&P 500 recently touching a new all-time high, some analysts are already anticipating an incumbent victory this year, citing the historical predictive power of stocks on presidential elections.
Why does the stock market say Biden will win the 2024 election?
Well, the S&P is actually one of the strongest historical predictors of presidential elections. Indeed, since 1984, the S&P has accurately predicted the outcome of virtually every general election. Extended to 1928, the index has correction predicted 19 out of 22 elections, an 87% success rate.
Here’s how it works: If stocks are higher in the three months preceding the election, the incumbent party will likely win — and vice versa. While the election is still about a year away, some believe stocks are primed to continue climbing through the year, evident from the S&P recently notching a new peak.
The principle makes sense in some ways. After all, the strength of the economy is typically the single-most-important issue to voters. The stock market acts as a pseudo-proxy for the wider economy.
Especially in recent years, strength in metrics like jobs, spending and economic growth has typically gone hand-in-hand with strong stock performance — and election wins.
Should the ship hold steady through the year, Biden will have a strong case for reelection entering debate season.
What Does the Stock Market Say About the 2024 Election?
Now, to be clear, correlation is not causation. While the indicator’s accuracy is noteworthy, it’s also imperfect. 22 elections isn’t exactly a massive sample size, after all.
The prediction is also early. A lot can change during the nearly full calendar year between now and election day.
That said, Biden is currently in a pretty good spot. Inflation is down, the labor market is strong and fears of an impending recession continue to dwindle by the day. With interest rates set to ease later in the year, prospects of a “soft landing” — that is, an economic outcome where inflation eases without spiraling the country into a recession — have never been better.
Assuming things don’t radically change — which, to be clear, they might — Biden would likely be an easy favorite for reelection.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
