This article was published by The McAlvany Intelligence Advisor on Monday, November 7, 2016:
Back in January, Tyler Durden (a pseudonym), writing at ZeroHedge, said one would be far better off watching the markets than the debates if one wanted to know who the next president would be:
This relationship occurs because the stock market reflects the economic outlook in the weeks leading up to the election. A rising stock market indicates an improving economy, which means rising confidence and increases the chances of the incumbent party’s re-election.
Right on cue, the stock market has declined nine days in a row (through last Friday), the first time that has happened since 1980. But more importantly is how it has behaved since Monday, August 1st. The S&P 500 index has declined by 4.5 percent, which, according to Durden, translates into an 86 percent chance of Trump’s winning on Tuesday.
Durden has the most unlikely company: a professor from Stony Brook University situated in Stony Brook, New York. Professor Helmut Norpoth has been picking winners using his Primary Model since 1996, and has back-tested it to 1912. Writes Norpoth, it’s based on early primary wins:
Winning early primaries is a major key for electoral victory in November. Trump won the Republican primaries in both New Hampshire and South Carolina, while Hillary Clinton and Bernie Sanders split the Democratic primaries in those states…
For the record, the Primary Model … has correctly predicted the winner of the popular vote in all five presidential elections since it was introduced in 1996….
For elections from 1912 to 2012, the Primary Model [has retroactively picked] the winner … every time except in 1960.
Accordingly, Norpoth gives Trump an 87 percent chance of winning Tuesday’s election.
Norpoth also has his “pendulum” model, which “favors the GOP in 2016 as well … [it] is the cycle of presidential elections. After two terms of Democrat Barack Obama in the White House, the electoral pendulum is poised to swing to the GOP this year.” By itself that model is predicting a Trump win, 52.5 percent to 47.5 percent.
With the stock market down nine days in a row – the first time since 1980 – it may just be telling a story that pollsters aren’t. By the way, Norpoth has such confidence in his models that he is betting his own money, buying shares in Trump in the Iowa Electronic Markets.
RealClearPolitics: General Election: Trump vs. Clinton
RealClearPolitics: Battle for White House – Electoral College
FiveThirtyEight.com: Who will win the presidency?