Rapid City financial advisor Rick Kahler: Can polls, economic indicators or betting markets predict election results?

Economic indicators have historically been powerful predictors of who will win the White House, and this year is no exception. With polls showing Kamala Harris and Donald Trump in a close race, how do the key economic metrics favor each candidate?

The Misery Index, which combines inflation and unemployment rates, is used to measure economic discomfort. With inflation at 3-4% and unemployment below 4%, the current Misery Index is around 7. The incumbent party has historically won with a 60-65% chance when the Misery Index is below 10. Yet Republican candidates continue to claim we’re headed toward a depression, despite the numbers saying otherwise.

Next is GDP growth, which is a strong indicator of how well the economy is performing. Growth is currently at a steady 2-3%, and when GDP growth exceeds 2%, the incumbent party wins about 75% of the time. Republican candidates continue to highlight economic woes, but these steady growth numbers give Harris a stronger case. That said, not all sectors are feeling this growth equally. Many workers, particularly in rural areas or energy sectors, may feel left behind by the recovery, and Trump’s messaging often targets these voters.

Real disposable income—the money people have left after taxes and inflation—is growing modestly at 1.5-2%. This gives Harris an edge since income growth of any kind correlates with an 80% chance of the incumbent party winning. However, inflation has outpaced wage growth in certain areas, meaning that for some voters, real wages have stagnated. This economic anxiety could help Trump, especially if voters feel their paychecks are not keeping up with rising costs.

Then there’s the Consumer Confidence Index, which reflects how optimistic voters feel. The current level is 105, enough to tilt things toward Harris, as confidence over 100 tends to favor the incumbent with a 65-70% probability. Still, Trump continues to hammer the message that the economy is in a tailspin, pushing his supporters to believe drastic change is needed. His focus on issues like rising energy costs and dissatisfaction in manufacturing-heavy regions may resonate with voters who feel disconnected from the broader economic recovery.

Perhaps the most powerful economic metric is the stock market. The S&P 500 has climbed over 20% so far this year, and when the market rises in the months before an election, the incumbent party has an 83% chance of retaining the presidency. Trump praised the stock market’s success under his own administration as a testament to his economic policies. Yet now, with similar market gains under a Democratic president, he claims the economy is in collapse. This contradiction highlights how political rhetoric often shifts depending on which party is in power, even when the economic numbers tell a different story.

Here is a summary of the chance of victory for Harris from each indicator:

      • Misery Index: 62.5%

         •      GDP Growth: 75%

         •       Real Disposable Income Growth: 80%

         •       Consumer Confidence: 67.5%

         •       Stock Market: 83%

These figures give Harris a total weighted probability of 72.93%.

However, despite these favorable economic numbers, the betting markets suggest a different narrative. On several platforms, Donald Trump has pulled ahead. He has a 54% chance of winning according to Odds Shark and is favored on Betfair with odds of 1.92 (10/11). Trump is also leading in key swing states like Georgia and Arizona, where his odds are as high as -225.

As we approach Election Day, the final outcome remains unpredictable. Economic metrics might favor Harris, but the betting markets and Trump’s ability to gain ground in battleground states show this election could go either way. As always, the only indicators that ultimately matter are the choices voters make when they cast their ballots.

Rick Kahler, CFP, is a fee-only financial planner and financial therapist with a nationwide practice, Kahler Financial Group, based in Rapid City. His co-authored books include Coupleship Inc. and The Financial Wisdom of Ebenezer Scrooge

Photo: a public domain image of a cartoon that summarized the futility of polling ahead of the 1948 Dewey-Truman election, which Truman won, as posted on wikimedia commons