Keep an eye on the stock market between now and the presidential election: There's a very good chance investors will point the way to the winner.
In fact, since 1944 the behavior of the S&P 500 has been an excellent indicator of who will win the White House.
Looking specifically at this year's contest, a rising market between Aug. 1 and Oct. 31 would favor Democrat Hillary Clinton, while a decline would point to victory for Republican nominee Donald Trump in the Nov. 8 election.
That's based on an analysis of how the market performed compared to which party at that time held the Oval Office.
For instance, the indicator worked in 1948 during the race between incumbent Democrat Harry S. Truman and Republican challenger Thomas Dewey. The S&P 500 rose 4.4 percent during the period in question, correctly indicating that the party in power would retain the White House, according to data provided by Sam Stovall, U.S. equity strategist at S&P Global Market Intelligence.
One of the few times it failed was in 1968. That was during the race between Democrat Hubert H. Humphrey and Republican Richard M. Nixon. The index rallied a healthy 3.9 percent in the August-to-October period, but Humphrey failed to take the baton from Lyndon B. Johnson and hold onto the presidency.
In all, the market has predicted the winner by party of 15 of the last 18 elections — an 83 percent success rate. The chart below shows how the pattern has played out over time. (The winner is in capital letters, while (i) denotes the incumbent party.)