2020 is an election year in the USA – a few facts and figures for the stock markets

In a few months the president will be elected in the USA. Today, it is not even known who will run. What is certain, however, is that emotional reporting and daily changing forecasts will soon be on the agenda. Since strong emotions are not known to lead to the best investment decisions and many election forecasts were clearly off target, here are some historical data.

Due to the complicated US electoral system, a victory does not require a majority of votes, but a majority of electors. For example, Trump 2016 received only 46% of the votes, but 57% of the electorate. In almost 40% of the elections the winner did not have a majority of the votes. Moreover, the outcome of the election always depends on the result of the „swing states“, which depends on the inclination of the swing voters.

Since the Second World War, there have been 18 elections and 13 presidents. Only three presidents were voted out of office and one of them did not run again. The probability of winning the election a second time after a party change is statistically very high; only Carter (1976) was not re-elected. This would argue in favour of re-election Trumps.

Historical data also suggest that the re-election of a president is closely linked to the development of the economy and stock prices. If the economy showed weakness towards the end of a term of office or a recession occurred, re-election was less likely. Weak stock market performance also makes re-election less certain. If the economy and the stock markets are able to maintain the current pace, this would also speak in favour of Trump’s re-election.

Republican candidates are often said to be closer to the capital markets. However, the stock markets have performed better in times of democratic presidents, especially in the year before and after the election. This is a time consideration and depends heavily on whether a recession shook the US economy at the beginning or end of the term. Nevertheless, the trend generally points to a rather weak stock market year in 2020. Since the election trumps, the stock markets have performed extremely well for a Republican candidate and the pure figures speak for re-election. Should he win, it will be difficult to survive the second term of office without recession. But only then would it be possible for the good stock market performance to continue for another four years.

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