Stocks historically win in this election scenario

S&P 500 has gained 9.6%, on average, in the year following a president winning reelection: LPL Financial

History suggests a President Trump victory on Election Day would be the best outcome for the stock market.

Continue Reading Below

Since 1950, the benchmark S&P 500 has gained 9.6%, on average, in the year following a president winning reelection, according to an analysis from LPL Financial. The index has risen 71% of the time.

On the other hand, the S&P 500 has averaged a 4.8% gain if the incumbent loses while climbing 50% of the time.

TRUMP ELECTION WIN IS BEST CASE FOR STOCKS: JPMORGAN

“Think about it—usually when a president wins reelection, it means the economy is going pretty strong, so stocks tend to do well,” wrote LPL Financial Chief Market Strategist Ryan Detrick. “The flip side is that new leadership in Washington can bring with it potential change that could rock the boat and hold stocks back.”

Typically presidents who oversee a recession within 24 months of a reelection bid do not fare well, losing five of seven campaigns, according to a previous note from Detrick.

The last four former presidents to do so, George H.W. Bush, Gerald Ford, Richard Nixon and Herbert Hoover, all fell short in their attempts to secure a second term in the White House. Calvin Coolidge, back in 1924, was the last president to win reelection under the circumstances.

On Thursday, the U.S. economy is expected to exit its COVID-19-induced recession, the sharpest of the post-World War II era, with annualized growth of 35.3%, according to the Federal Reserve Bank of Atlanta's GDPNow. The economy contracted at an annualized pace of 5% and 31.4% during the first two quarters of the year.

DEMOCRATIC SWEEP WOULDN'T GUARANTEE MORE CORONAVIRUS RELIEF

Trump, however, does have some important measures of the economy working in his favor. A second-quarter reading that matches the Atlanta Fed’s forecast would bring the average of the two quarters ahead of the election to 2.1% which should be good for 51.9% of the two-party vote – the same as former President Barack Obama, according to Detrick

Additionally, 56% of Americans say they are better off now than they were four years ago, according to a Gallup Poll released earlier this month, topping the readings at the same point in the terms of former Presidents Obama (45%), George W. Bush (47%), George H.W. Bush (38%) and Ronald Reagan (44%). Of that group, only George H.W. Bush did not win reelection.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

As mentioned above, “If the economy is in a recession before the election, reelection odds decline, while here we are demonstrating that a strong economy right before an election is good,” Detrick wrote. “This sums up 2020—things are just really confusing!”