July 31, 2024

Up to the end of May the race for the White House was an even one. However, since then there was a debate that derailed the Biden reelection run, there was an attempt on former President Trump’s life and Vice President Kamala Harris became the presumptive Democratic presidential nominee. Whether any of these developments have a lasting impact on the presidential race remains to be seen. The most recent data, the betting odds point to a surge by the Presumptive Democratic nominee. The numbers put the race back to where it was at the end of May. Whether Ms. Harris surge continues remains to be seen. The data presented here shows that in the past the different combinations of control of the executive and legislative branches have produced vastly different economic performance. Hence it behooves investors to keep track of the political developments that alter the likelihood of different combinations for they portend a different economic outlook. For example, the data reported in Table 2 shows an increase in the likelihood of an economic trifecta to 39.29%. However, the increase in likelihood is not evenly distributed among the two possibilities. The data shows a slight increase in the likelihood of a Democratic trifecta to 13.54% as well as an increase in the likelihood of a Republican trifecta to 25.75%. Table 3 shows that not all trifectas are created equally. That the Democratic trifectas tend to underperform the post-war averages while the Republican trifectas tend to outperform the post-war averages. Viewed from this perspective the changes in the likelihood of the trifecta are a bullish development. Although the odds of a divided government have declined, at 60.71% the odds of a divided government remain quite high and represent the most likely outcome. Again, the changes in the likelihood of a divided government were not uniform or similar. Table 2 shows that the likelihood of a divided government led by a Democratic President declined slightly to 35.35% and the likelihood of a divided government led a Republican president declined to 22.25%. Again, as before, Table 3 show significant difference in the performance of Democratic and Republican led divided governments. Table 2 shows that last month there was little change in the likelihood of a Democratic led divided government and the likelihood of a Democratic trifecta. Nevertheless, Table 2 also shows that there was an increase in the likelihood of a Republican trifecta and a decline in the likelihood of a Republican led divided government. Table 3 shows that a Republican led divided government underperform the Republican trifecta. Therefore, the increase in the likelihood of a Republican trifecta and a decrease in the likelihood of a Republican led divided government is a welcome and bullish development.

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