The stock market’s strong rally in the first two months of 2024 bodes well for President Joe Biden’s re-election chances in November, according to Ned Davis Research. Historically, a strong start to the year for stocks has tended to foreshadow an incumbent victory, especially for Democrats.
The S&P 500 has surged nearly 8% so far this year, extending last year’s strong rally driven by continued disinflation, the outlook for interest rate cuts from the Federal Reserve, and solid economic growth. These factors, if they persist over the next few months, could help give Biden a boost in his approval ratings.
Ned Davis Research strategist Ed Clissold noted that historically, the stock market has usually been weak in the early year of a Presidential election, with a median drop of 1%. However, when an incumbent party wins the election in November, the early part of the year sees an average gain rather than a loss.
“When an incumbent Democrat has gone on to win, the DJIA has risen a median of 2.6% in the first two months of the year versus a 6.2% decline when an incumbent Democrat has lost,” Clissold said.
While Clissold acknowledges that two months of stock market performance is not a determining factor of a Presidential election, it is still an interesting trend to note. He emphasized that many factors beyond the stock market go into voters’ decision-making process.
However, a rising stock market ahead of the November election could indicate a strong economy and improving consumer confidence, ultimately providing a tailwind to Biden’s re-election chances.
“From a 30,000-foot perspective, a better economic backdrop would help Biden’s chances,” Clissold said. With the stock market performing well, Biden may have a favorable environment leading up to the election.
