Key trends highlight tight race ahead of US elections

High-stakes election: Swing states hold the key

What the chart shows

This chart visualizes the betting odds for US presidential nominees across all 50 states on Polymarket, a decentralized information market platform where users can bet on the outcomes of future events. States are color-coded based on the likelihood of each party winning: dark blue indicates a “safe” Democrat lead, dark red indicates a “safe” Republican lead and shades in between represent varying degrees of lean towards either party.

Behind the data

This election cycle has been marked by extreme unpredictability, driven by extraordinary events such as the attempted assassination of Republican candidate Donald Trump and the last-minute decision by the Democratic Party to replace Joe Biden with Kamala Harris. These developments have disrupted traditional election forecasting models, leaving both parties scrambling to adjust their strategies.

The chart underscores the importance of key swing states—Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin—in determining the outcome of the election. These battleground states are likely to see intense campaigning from both parties as they are crucial for either candidate to reach the required 270 electoral votes to win the presidency.

Toss-up states hold key to tight election

What the chart shows

This chart, based on betting odds from Polymarket, shows the projected number of electoral college votes, from a total of 538, that each party is expected to win in the upcoming election. A party must secure a majority of 270 votes to win the presidency. States are categorized by their likelihood of voting for either the Democratic (blue) or Republican (red) party. A “safe” state is where one party has at least a 90% probability advantage over the other. For example, Arkansas is considered a safe Republican state with a 98% chance of voting Republican versus a 2% chance of voting Democrat, resulting in a 96% spread. “Likely” states have a spread between 25% and 90%, “leaning” states have a spread between 10% and 25% and “toss-up” states have a spread of 10% or less.

Behind the data

The election is shaping up to be one of the tightest in recent history. With 36 electoral college votes currently classified as “toss-up”, these contested states could likely determine the outcome. With such a close race, there is mounting pressure on American institutions to ensure a fair and secure process, especially amid growing concerns about potential international interference and voter fraud. This environment also underscores the importance of each vote in these pivotal states, where even a small shift in voter turnout or preference could tip the scales.

Stocks surge early under Democrats, gain more over full term with Republicans

What the chart shows

This table examines the performance of the Dow Jones Industrial Average and S&P 500 index during each US president’s first year in office and across their full four-year term, starting with Rutherford B. Hayes (1877). The first column lists the presidents and their political affiliations while the second and third columns show the Compound Annual Growth Rate (CAGR) of both indexes during their first year and full term. The table also includes the mean and median CAGRs for each party, offering a comparative view of market performance under different administrations.

Behind the data

The data reveals a tendency for the stock market to perform better during the first year of a Democratic presidency, with a median return of 16.2% for the Dow Jones and 15.1% for the S&P 500. In contrast, Republican presidencies have a median first-year return of -0.6% for the Dow and 3.5% for the S&P 500. This trend remains over a full four-year term. Democratic presidencies show a higher median return of 9.1% for the Dow Jones and 5.8% for the S&P 500, whereas Republican presidencies see a median return of 5.3% and 4.7%, respectively. This suggests that the market may favor a Democratic leadership, both initially and over the full terms.

Sector performance shows how stocks react to presidential elections

What the chart shows

This chart illustrates the relative performance of various S&P 500 sectors compared to the benchmark index during US presidential election years. The years in which each sector underperformed the S&P 500 are shown on the left and those in which it overperformed are shown on the right, with the colors representing the political party of the sitting president during that year (blue for Democrat, red for Republican.) This visualization helps identify patterns in sector performance that may correlate with different political administrations.

Behind the data

Historically, the Energy, Consumer Discretionary, Financials, and Communication Services sectors have shown a tendency to consistently outperform the S&P 500 during election years.  However, the most notable observation from this chart is the clear correlation between sector performance and the political affiliation of the elected president. The Consumer Discretionary and Communication Services sectors have shown strong outperformance in all years when a Democratic president was elected, while the Financials sector has reliably outperformed during elections that resulted in a Republican president. This pattern suggests that different sectors may react positively to the anticipated economic policies of each political party.

US dollar remains strongest since Reagan era but faces downward trend

What the chart shows

This chart breaks down the performance of the US Dollar Index (DXY)—which tracks the value of the USD against a basket of six major currencies—since the start of each presidential term. The X-axis represents the days since each president’s inauguration while the Y-axis shows the percentage change in the DXY.

Behind the data

As the chart shows, the current strength of the US dollar has only been surpassed once—during Ronald Reagan’s presidency, when emergency tax increases, heightened defense spending, and a Fed funds rate above 11% bolstered the dollar. Earlier this year, the dollar gained some strength amidst uncertainty in current Federal Reserve policy and the decline of the Japanese yen, but it is  now on a downward trend.

Republican sweep leads betting odds for 2024 but split government remains a strong contender

What the chart shows

The balance of power in the US government is determined by the outcomes of the presidential, House and Senate elections. The chart above shows the current Polymarket betting odds for all eight possible combinations of these outcomes. A Democratic sweep indicates that Democrats win the presidency, Senate and House, while a Republican sweep means Republicans win all three. Red-shaded areas represent scenarios where Donald Trump wins the presidency, while blue-shaded areas represent scenarios where Kamala Harris is the victor.

Behind the data

Among all possible outcomes, a Republican sweep is currently the most likely, with about a 30% probability. A Democratic sweep is also relatively likely, with odds of around 24%. Together, this suggests that in more than 50% of scenarios, one party is expected to control all three branches of government. The balance of power is crucial because a sweep enables a party to more easily pass its legislative agenda. However, with a nearly 46% chance of a split balance of power, we could see significant gridlock in the American government.

Spike in Misery Index reflects post-pandemic economic struggles

What the chart shows

The Misery Index is a measure of economic distress, calculated by adding the seasonally adjusted unemployment rate to the inflation rate. This chart tracks the Misery Index from 1950 to 2024, highlighting its levels during each US presidency from Truman to Biden. Each president’s term is color-coded, with red for Republicans and blue for Democrats. The grey line represents the unemployment rate over time while the red line shows the Misery Index. The area between the two indicates the portion of economic distress attributable to inflation.

Behind the data

Before the pandemic, Americans were experiencing an almost historically low misery index; the country was near full employment and inflation rates were close to the 2% target. However, at the start of the pandemic during Trump’s presidency, the index surged to 15 before easing slightly to 12.5 under Biden. From a historical perspective, the US saw spikes in both inflation and unemployment during much of the 1970s and 80s, as well as in 1991 and 2011.