When it comes to financial forecasting, there are two main methods used by investors and Wall Street analysts: “fundamental” and “technical” models. The fundamental approach focuses on underlying business factors that impact the values of stocks, bonds, and commodities. Fundamental analysis involves examining factors such as sales growth projections, total addressable markets, competitive advantages, and cash flow allocation. On the other hand, technical analysis looks at past price patterns to predict future price movements based on chart patterns and resistance levels.
In the context of presidential elections, fundamental and technical analysis are also commonly used to predict outcomes. The fundamentals encompass factors such as campaign strategies, economic conditions, and candidate charisma, while the technicals include polling data and prediction markets. Historically, the fundamentals have had a strong influence on polling and betting market outcomes. However, in the 2024 presidential race, there is a significant disconnect between the fundamentals and technicals, with Vice President Harris trailing in polls but leading in betting markets.
The positive-style campaign Harris is running usually wins, yet she’s trailing
Thomas Miller, a data scientist at Northwestern University, notes this unusual discrepancy and attributes it to Harris’ positive campaign approach. Despite the favorable fundamentals supporting Harris, the technical indicators show Trump ahead. Miller emphasizes Harris’ optimistic and inclusive messaging as key factors that should lead to victory based on historical trends. In contrast, he criticizes Trump’s negative and extremist messaging, which deviates from successful past campaign strategies.
While Miller focuses on the technical analysis, he acknowledges the fundamental predictions of forecasters like Allan Lichtman, who rely on factors such as incumbency keys to forecast election outcomes. Lichtman predicts a win for Harris despite the tight polling and heavy betting in favor of Trump. The divergence between the fundamentals and technicals in this election is unprecedented, leading to uncertainty about the final outcome.
Why the technical and fundamental analyses of the election look so different
The disparity between the technical and fundamental analyses reflects the current political landscape and economic conditions in the country. Miller suggests that while economic indicators may look positive on a macro level, many Americans still face financial struggles that impact their perception of the economy. This disconnect contributes to the diverging predictions from the technical and fundamental camps.
As the election approaches, the outcome remains uncertain, with Harris and Trump both experiencing highs and lows in the race. The conflicting predictions from the fundamentals and technicals will only be resolved on Election Day, providing a glimpse into the accuracy of these forecasting models.
