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Strategic public planning: a method of forecasting the results of presidential elections in the United States. Afterword...
Material posted: -Publication date: 16-11-2016

The analysis of the effectiveness of forecasting the results of presidential elections in the United States through the use of information on the dynamics of U.S. stock indexes three months before the election. Take into account not only the dynamics of the stock index S&P 500, but also the dynamics of other major U.S. stock indexes through the formation of an aggregated indicator of the U.S. stock market. It is shown that the method of stock indices solvent and can be used to predict outcomes of the next presidential election in the United States.

In mid-August of this year was published our paper [1] about the forecast of results of presidential elections in the United States on the basis of the analysis of the dynamics of U.S. stock indexes. Recall its main provisions.

For predicting the results of presidential elections in the US S&P analyst, Global Market Intelligence Sam Stovall urges all to forget the classic sociological surveys and direct all focus on stock indexes. In his opinion, the election results depend on the opinions of investors and their sentiment for the last three months before the election.

It is reported that experts of S&P reviewed the historical data for the last 72 years, the dynamics of stock indices ahead of the elections and the voting results for the post of President of the United States. The key indicator was based on an index "the wide market" S&P 500, which is composed of 400 industrial, 20 transportation, 40 utility and 40 financial companies. It covers about 80% of the total capitalization of the companies traded on the new York stock exchange [2,3].

Starting with the election of 1944, the first since the formation of the company, the S&P in its current form, was analyzed for the last three full months before the election, from July 31 to October 31.

Analysis of the data showed that if three months before the elections, the S&P 500 index was growing up in 82% of cases the ruling party has retained power. In the case if the indices fall over the 3 months before the election to power in 86% of cases come opponents.

The explanation is simple: if the economy expands, the flash crash, the voters agree with the President, investing in the stock market instruments. In the opposite case, the voters want the new administration. We can say quite simply: the election results largely depend on the opinions of the investors who risk their money and therefore try to understand in depth the current situation. They differ from those who mainly calculated the pre-election shows and performances.

In the entire history of observations – 17 election campaigns – there were only 3 exceptions: the election of Dwight Eisenhower, when he retained his post, despite the collapse of quotations on the background of the Suez crisis and the victory of Richard Nixon in 1968 and Ronald Reagan in 1980, Analysts explain such deviations strong candidates from third parties who have taken votes from the favorites of the race.

It is clear that S&P analysts are trying to PR their index, the values of which contracts are concluded on the derivatives market, for example, options on the Chicago stock exchange. But for greater objectivity, it is advisable to consider also the dynamics of other American indices.

Therefore, in the work [1] was considered not only the dynamics of the S&P 500 index, but all the major U.S. stock indexes, as well as the generalized stock index composed of the partial indices, their weighting using factors of importance (Fig. 1).

These factors were determined by the technique presented in [1] and is based on the monitoring data the stock market in the 1st half of 2016

The analysis showed that mid-August 2016 the situation is more favoured candidate from the democratic party.

But, this was only a preliminary assessment because crucial was supposed to be for the next three months of observation.

Fig. 1. The significance of the us stock indices in the generalized indicator

Now that elections have taken place, it is advisable to take stock – to determine the possibility of application of indices to assess the results of the upcoming presidential election in the United States.

Data on the dynamics of U.S. stock indexes that include values for the last three months before the election, is represented in Fig. 2-6.

It is seen that in early August, stocks have suddenly ceased to grow, and from mid-August to the last decade of September there was a rather sharp decline in their values, which signaled the growing influence of the Republican candidate.

Then until mid-October saw an overall balance, although very volatile.

Fig. 2. Stock indices of S&P and NYA in 2016

Fig. 3. Stock indices DJI and NYA in 2016

Fig. 4. Stock indices and NDX NASD in 2016

Fig. 5. The generalized dynamics of the American stock index from the beginning of 2016 (differential values)

Fig. 6. The generalized dynamics of the American stock index in the 2nd half of 2016 (differential values)

The greatest stability and even small growth in sight in the technology market (Fig. 4), which perhaps was connected with the plans of the incumbent President Obama after the election to do it. Probably, these plans were not just words, and behind them were already implemented or future investments, as well as lobbying opportunities. And what about the immediate future of these plans, no uncertainties were not available.

Finally, the last ten days of October began a steady decline in the values of stock indices, which signaled the growth of the rating of the Republican candidate.

And after the election, there was quite a sharp rise in values of all indices that can also serve as an illustration of the support of the elected President, or at the very least, point to greater certainty in the stock market that almost always perceived positively by investors.

Thus, in the last election campaign was confident enough to predict the outcome 2 weeks before the election.

And this is despite the fact that the last election campaign was not standard and very difficult to predict, especially for American politicians. It is expected that other, more peaceful campaigns, their results may be anticipated for 1-1,5 month before the election.

Conclusion: us stock indexes can be used to predict the outcome of future presidential elections. Their use will allow to reduce the errors of the Russian politicians and political analysts in predicting the results of the voting that will enhance the quality of foreign policy.

List of sources used

  1. A method of forecasting the results of presidential elections in the USA // the Center for strategic estimates and predictions. 2016, http://csef.ru/ru/politica-i-geopolitica/326/ob-odnom-metode-prognozirovaniya-itogov-prezidentskih-vyborov-v-ssha-6937
  2. S&P linked stocks with the winner of the election in the United States https://www.gazeta.ru/business/news/2016/08/01/n_8945459.shtml
  3. Makarenko G. S&P has found a way to predict the new President of the United States, http://www.rbc.ru/finances/01/08/2016/579f38a39a79475e5f833eac

Fomin A. N., Samarin V. I.

Tags: assessment , USA


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