In just under a year, voting will be held for the 46th president of the United States of America. The acrimonious rivalry between the liberals and the conservatives continues to divide the country, and once again, it seems like bad news for the Democratic party. It’s highly unlikely that the election swings in favor of them this time around, as numerous economic models conducted by Moody’s Analytics, a financial services company have predicted Trump’s incumbency. Due to the economy being so successful under Donald Trump, retention in presidency is almost inevitable, as three separate economic models have been tested, each one producing similar results.
Moody’s Analytics models have proven shockingly effective over the past forty years, accurately predicting every presidential election back to 1980. Well, almost every presidential election. The all too familiar 2016 election between Donald Trump and Hillary Clinton falsely predicted a democratic win through Hillary Clinton, and subsequently hinted at a potential flaw within these models.
The first of Moody’s three models, the pocketbook model, predicts Trump winning at 351 electoral votes to 187 votes and focuses on three major variables: gasoline prices, home prices, and real personal income. Assuming average voter turnout, this model calculates that Trump wins by the largest margin out of the three. It is also seen as the most influential model because it is the most economically driven, with factors being primarily based on long term economic variables, as well as having historically elicited the strongest voter reactions.
Gas prices are important because the rising of them creates impressions that generally, things are getting worse. In addition to this, many voting Americans purchase gasoline at recurring intervals, whereby their prices are observed daily. Even those who do not drive, however, witness everyday advertisements showing these prices, making gasoline a frequent, highly visible economic indicator. Throughout his time in office, Trump has effectively kept gasoline prices at a stable to low level, greatly favoring him in his reelection bid.
Similar to gas prices, changes in home prices prove vital within the pocketbook model. Although they are not dealt with directly, home prices have a considerable impact on balance sheets, in that they are closely monitored by many in their neighborhoods. Homeowners who experience large price gains make them feel wealthier, where they are therefore subject to spending more money under the influence of being more financially comfortable. This bodes well for Trump, as home prices have greatly exceeded their prerecession peaks across most of the nation’s housing markets, and are likely to rise even further nearing the election.
Real personal income tells a similar story, as voters who experience wage increases will likely feel more comfortable and thus express satisfaction with the status quo. History repeatedly points to kitchen-table economics remaining exceedingly crucial in determining the outcome of the election, ultimately showing the significance that ongoing economic sentiment at the basic household level could hold in the next presidential election.
Moody’s second election model favors Trump the least, predicting him at 289 electoral votes to 249, making it even closer than the 2016 election. This model relies on fewer economic variables, focusing mainly on the S&P 500 Index, a stock market index that many consider one of the best representations of the US stock market. It measures the stock performance of 500 large companies listed on the stock exchanges and is a highly followed and respected equity indication.
Trump often points to his administration’s economic policy achievement as a result of the success of the stock market. The S&P 500 and its relationship with voter sentiment has statistically shown to be crucial in the lead up to the election, as fluctuations in the stock market are likely to impact voters’ contentment with the status quo.
That being said, Moody’s Analytics baseline forecast has estimated that the S&P 500 declines 9% from now until election day, regardless of how well it has done under Trump thus far. Even though this substantial drop is expected, it does not predict to be enough for the Democrats to unseat Trump. The stock market results are, however, very sensitive to altercations in the S&P 500, and if it were to decrease by 12% rather than 9%, then this model would predict a Democratic win of 279 electoral votes to 259.
The final model to be looked at is the unemployment model, and although it also relies on fewer economic variables than the pocketbook model, it predicts a more comfortable win for Trump over the stock market model, with 332 electoral votes to 206. Although it includes real personal income just like the pocketbook model, it’s most defining feature is state-specific unemployment rate. The influence that the unemployment rate has on this model changes based on its relation to each state’s natural rate of employment, which stays consistent with those who are fully employed and varies heavily between each state.
The rate of employment holds a considerable amount of voter sentiment because it’s highly visible and highly valued, just like gas prices and other economic indicators. This is especially true regarding not only those who are unemployed themselves but also those who witness family and friends unemployment, leaving a potentially substantial psychological impact on those people.
Since the election of Donald Trump, the economy has seen the addition of over 6.4 million jobs and an unemployment rate of 3.5%, making it the lowest it’s been since May 1969-over 50 years ago. Furthermore, the unemployment rate of African Americans reached a record of 5.5% with the previous record of 5.8% also having been set under Trump in 2018. Without a drastic change in these statistics nearing the election, it is more than likely that Trump holds his position in office for 4 more years after the election.