On November 4th, Caixin Global News (Editor: Liu Rui) With the US election on November 5th just around the corner, the result of this election has become a focus of global attention.

Despite recent indications from US gambling platforms showing that the Republican candidate Trump's odds are better than the Democratic candidate Harris, the trend in US stocks shows the opposite result: the recent strong performance of US stocks, based on historical patterns, often means that the ruling party - Harris' side is more likely to win.

However, some commentators have warned that although this historical signal is highly accurate, it may become ineffective in this year's election.

Are US stocks suggesting an 80% chance for Harris to win?

History has shown that the performance of US stocks in the three months before the US election is often highly correlated with the election results: when the S&P 500 index rises in the three months before the election, the ruling party wins in 80% of cases; conversely, when the S&P 500 index falls in the three months before the election, the opposition party wins in 89% of cases.

Since 1928, this has been a highly accurate signal in every election.

In the first three months of this election, the S&P 500 index rose by 2.28%, rose by 2.02%, and fell by 0.99%. Looking at the cumulative increase over the three months, Harris is very likely to win this election.

Moreover, even in October, most of the time the US stocks were growing, except for the last day of October (October 31st) when the s&p 500 index plunged by 1.86% in a single day, causing the monthly gain to be reversed.

Will the US stock market signals fail this year?

However, market experts point out that the market and political landscape of this year's election are very unique. This means that this year may be a rare year where the 'US stock signal cannot predict the election results'.

CFRA Research's Sam Stovall stated that there are some astonishing similarities between today's election cycle and the year 1968. Coincidentally, in 1968, the trend of the US stock market and election-related signals failed.

In 1968, the then-President Lyndon B. Johnson chose not to seek re-election, and Vice President Hubert Humphrey took his place in the election. This is very similar to this year's election: Joe Biden withdrew from the race, and his Vice President took over to run for election.

Also in 1968, the Federal Reserve lowered interest rates from July 31 to October 31, driving the rise of the US stocks, but this ultimately did not help the ruling party win. This year, we are facing a similar situation: last month, the Federal Reserve cut interest rates by 50 basis points for the first time since 2020.

The final similarity is that in 1968, the ruling Democratic Party faced a restless group of people demanding change - the dissatisfied voters’ issue at that time was the Vietnam War. Now, the Democratic Party also faces a large number of dissatisfied voters demanding solutions to rising prices and immigration issues.

"Therefore, just like in 1968, the market's rise may be a reflection of 'straw poll' rather than a 'reelection' signal," Stovall said.

Has the US stock market been distorted by the AI ​​boom?

Other individuals from Wall Street indicate that there are clear driving factors in the US stock market in 2024, especially artificial intelligence, which makes it unable to imply political outcomes.

Jay Hatfield, CEO of Infrastructure Capital Advisors, stated: "We believe that the US stock market cannot accurately predict election results because the stock market has become increasingly concentrated, and the prosperity of artificial intelligence is distorting stock returns."

More importantly, in the US stock market, there may be election indicators more accurate than the S&P 500 index, consistently pointing to Trump's victory.

In recent months, assets related to 'Trump's trade' have risen, with Bitcoin-related stocks, Trump media, and the technology group (DJT.US) all rising due to expectations of Trump's re-election. Billionaire investor Stanley Druckenmiller stated that this indicates the market is 'very confident that Trump will win.'