S&P 500 Incumbent Correlation

Overview

This pillar analyzes the historical correlation between the S&P 500's performance in the three months before an election and the incumbent party's success. It provides a powerful, data-driven signal based on the idea that voters' financial well-being influences their choice at the ballot box.

What It Does

The model calculates the percentage return of the S&P 500 index over the 90-day period leading up to a major election. This performance is then compared against a historical model that maps market returns to incumbent party win probabilities. It also factors in market volatility (VIX) as a measure of economic uncertainty, which can temper the primary signal.

Why It Matters

It offers a predictive edge by cutting through the noise of daily polls and media narratives. By focusing on a fundamental driver of voter behavior, the economy, this pillar often provides a more stable and accurate long-range forecast than sentiment-based measures.

How It Works

First, the pillar identifies the election date and establishes the 90-day lookback window. It then retrieves the S&P 500's opening value at the start of the period and its closing value at the end. The percentage change is calculated and cross-referenced with historical data to generate a win probability for the incumbent party.

Methodology

The core calculation is the percentage return of the S&P 500 index from 90 calendar days prior to the election to the day before the election. The formula is: ((SPX_final - SPX_initial) / SPX_initial) * 100. Historically, a positive return greater than 0% in this window has correlated with an incumbent party victory over 80% of the time since 1944.

Edge & Advantage

This pillar provides a non-polling, fundamentals-based signal that is less susceptible to the daily churn of news cycles and campaign rhetoric.

Key Indicators

• S&P 500 3-Month Return

  high

  The percentage change in the S&P 500 index in the 90 days before an election. This is the primary signal.

• Market Volatility (VIX)

  medium

  Measures market fear and uncertainty. High volatility can indicate economic anxiety, potentially weakening the signal from a positive S&P 500 return.

• Wealth Effect Sentiment

  low

  Consumer confidence surveys that reflect how financially secure the public feels, acting as a supporting indicator.

Data Sources

• Yahoo Finance

  Provides historical and real-time data for the S&P 500 index (^GSPC).

• CBOE

  The source for the Volatility Index (VIX), which measures market expectation of 30-day volatility.

• Federal Reserve Economic Data (FRED)

  A comprehensive source for various economic indicators, including historical S&P 500 data.

Example Questions This Pillar Answers

• → Will the incumbent party win the 2028 US Presidential Election?
• → Will the S&P 500 be higher on November 4, 2024 than it was on August 6, 2024?
• → Which party will win the US presidency?

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