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Date: November 1, 2020

Approval Ratings Forecast Election Winner – Looking for a Big Reversal Next Week

Surprise?
Before I get into the topic of how approval ratings can predict the election, I want to predict that there will be positive vaccine and/or COVID news by Tuesday. The Trump campaign knows where they stand and that is probably their Hail Mary although with more than 60 million votes already cast, it would be hard to believe that any news between now and Tuesday can sufficiently influence the election.
Approval Ratings Forecast the Winner
To continue the theme of tidbits to help forecast the election, let’s take a look at incumbent approval ratings since my “magical” year of 1952.
1956 Ike 70%
1964 LBJ 74%
1972 Nixon 56%
1976 Ford 45%
1980 Carter 33%
1984 Reagan 52%
1992 Bush 29%
1996 Clinton 58%
2004 Bush 48%
2012 Obama 47%
2002 Trump 42%
First, we observe that, overall, approval ratings have been falling as partisanship has increased.
Second, we observe that before Bush II, no incumbent was ever reelected with less than 50%. Bush II and Obama let that floor drop to 47%.
With that said, Trump’s 42% on July 31st seems too low to be reelected. However, I will say this. If Donald Trump does get reelected, I would question whether using approval ratings has any accuracy anymore.
Bears Winning Now But Bulls Readying for Next Week
After a one day bounce, the sellers were out and about in the market on Friday with mega tech getting hit with the ugly stick. The decline is getting close to what I saw as the maximum downside ahead of the election. My thesis remains that the move into the election will be reversed after the election, if not sooner.
One additional piece of concern is that the Fab Five Plus stocks are all falling on what the masses perceived to be good news. In August I was writing about a peak of significance in mega tech versus the rest of the market and that is playing out.
I was universally panned when I called for selling Apple in mid-August above $130. I am unlikely to add it back above $100. If my forecast for a post-election rally does come to fruition, I think using that strength to rotate more money out of the Fab Five Plus and into other areas will be well served.
Below are presidential portfolios updated through Friday with Trump performing a litter better, but nothing strongly predictive.
Biden
1 weeks -5.29%
2 weeks -5.66%
3 weeks -6.48%
4 weeks -1.50%
Trump
1 week -6.20%
2 weeks -3.40%
3 weeks -4.74%
4 weeks -0.32%

 

Paul Schatz, President, Heritage Capital
Author:

Paul Schatz, President, Heritage Capital