This Stock Market Signal Says Donald Trump Will Lose the U.S. Election

Stock market moves suggest that Donald Trump will lose. What does that mean for ETFs like the iShares S&P/TSX Capped Composite Index Fund (TSX:XIC)?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There are many tea leaves that people are using to predict who’ll win tomorrow’s U.S. election. One, at least, seems to indicate that Donald Trump will lose.

According to CNN’s David Goldman, a negative stock market return in the three months leading up to an election predicts that the incumbent will lose — the incumbent, in this case, being Donald Trump.

According to Goldman, this indicator has predicted elections 88% of the time. Citing a model by CFRA, he went on to explain that Friday’s losses sent stocks negative for a full three-month period. Just days prior to that, they were up slightly.

If this holds until Tuesday, then we’ve got a strong sign that Trump will lose. But will it hold?

Stock market returns three months prior to the election

As of last Friday, the S&P 500‘s three month return was -0.4%. Just days earlier, it had been slightly positive. For the full year, the S&P 500 is actually up 0.37%. But CFRA’s model works off three-month returns. By that metric, we’re down for the relevant period and Trump is likely to lose.

This indicator still has time to change!

With all that said, there is still plenty of time for CFRA’s indicator to change. The indicator goes off the whole three months prior to the election, up until Election Day, which would give the S&P 500 time to swing positive for the three- month period. As of this writing, futures were pointing to a +1.44% open for the S&P 500 on Monday. If the S&P 500 stays at that level until Tuesday, then the indicator no longer predicts a Trump loss.

Implications for investors

Elections have a major impact on the stock market. Just like stocks can influence election outcomes, election outcomes can influence stocks. So, the U.S. election outcome may have implications for Canadian investors.

In this case, the best course of action may be to invest in Canadian equities like the iShares S&P/TSX Capped Composite Index Fund (TSX:XIC). Many people think that tomorrow’s election will be contested, leading to rampant market volatility. In that situation, Canadian equities may provide an oasis in the desert. The TSX has less exposure to the U.S. than the S&P 500, so it stands to reason that it won’t suffer as much election-related volatility.

That’s not to say that XIC is totally free from election risks, though. Heavily weighted in banks, utilities, and energy stocks, its returns partially depend on what happens in the United States. Enbridge ships oil to the StatesTD Bank has a massive U.S. retail banking divisionFortis operates several U.S. subsidiaries. All of these companies are big TSX components with heavy weighting. So the TSX index is definitely not totally immune to the effects of the election.

However, it’s significantly less exposed to them. Along with the stocks just mentioned, there are also TSX components with almost no U.S. source income. Canadian telecoms, for instance, largely fit this description. By buying the TSX index through XIC, you may enjoy less volatility through a turbulent election than if you’d bought the S&P 500.

Should you invest $1,000 in Ishares Core S&p/tsx Capped Composite Index Etf right now?

Before you buy stock in Ishares Core S&p/tsx Capped Composite Index Etf, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Ishares Core S&p/tsx Capped Composite Index Etf wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button owns shares of TORONTO-DOMINION BANK. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends FORTIS INC.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Canadian Red maple leaves seamless wallpaper pattern
Dividend Stocks

5 Canadian Dividend Stocks to Buy and Hold for the Next 20 Years

These Canadian stocks have paid dividends for decades, making them reliable investments to generate regular passive income.

Read more »

Dividend Stocks

3 Canadian REIT Stocks to Buy and Hold for the Next Quarter-Century

These three Canadian REITs trade cheaply and are highly reliable, making them some of the best stocks you can buy…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Practically Perfect Canadian Stock Down 24% to Buy Now and Hold for Life!

CNR stock is a top Canadian stock for investors, especially with shares down on the TSX today.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

The Best Canadian Stocks to Buy Right Away With $30,000

If you have $30,000 you're willing to invest, these are some of the first Canadian stocks to consider on your…

Read more »

rail train
Dividend Stocks

What to Know About Canadian Pacific Railway Stock for 2025

CP stock has now gone through a major merger, so what do investors have to look forward to?

Read more »

ways to boost income
Dividend Stocks

Top Canadian Value Stocks I’d Buy for Dividend Growth and Appreciation

If you are looking for income and capital appreciation, here are three Canadian value stocks for a great total return…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Canadian Stock to Buy With $2,000 Right Now

The company’s powerful combination of growth, income, and value, positions it well to deliver solid returns, making it a smart…

Read more »

Transparent umbrella under heavy rain against water drops splash background. Rainy weather concept.
Dividend Stocks

This 10.6 Percent Dividend Stock Pays Cash Every Single Month

Are you looking to invest for a rainy day? This 10.6% dividend stock pays cash every month, irrespective of the…

Read more »