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The Moody’s Analytics presidential election model has accurately predicted every presidential election since 1980. And it indicates a Democrat will win in 2016.
Moody’s newly released analysis for the next election, titled “A Nail-Biter in 2016,” predicts that the Democratic nominee for president will win with exactly 270 votes from the U.S. Electoral College — the minimum amount required to win.
Meanwhile, the Republican nominee is forecast to earn 268 votes.
Moody’s model does not predict which candidate will win, only which political party.
CNN Money notes that Moody’s has a great track record when it comes to such forecasts:
The model correctly predicted every state in the 2012 election and has a nearly 90% success rate in forecasting each state accurately since 1980.
The main underpinning of Moody’s model is not politics but the economy, however, with three economic variables being keys to the election outcome.
The first variable is the growth in real personal income per household in the two years leading up to the election, Moody’s report explains:
This variable captures the strength of the job market in each state, including job growth, hours worked, wage growth, and the quality of the jobs being created. It also captures how well households are doing on some of their investments, as it includes dividends, interest income and rents.
This variable currently favors the incumbent party, the Democrats, because all of these factors have been on the rise with the exception of wage growth, which is predicted to increase in the coming months.
The second economic variable influencing voting decisions is home values in the two years leading up to the election. Moody’s states that this is because homeowners base their thinking about future price growth on recent price gains.
Again, this favors the incumbent party because home values have been on the rise since the housing bubble burst.
The final economic variable is the percentage change in gas prices in the two years leading up to the election, the Moody’s report states:
Gas prices are a very visible price that matters significantly to the finances and perceptions of many households. Consumer confidence is closely tied to movements in gas prices, as rising prices quickly undermine confidence and falling prices lift spirits.
Because gas prices have fallen by nearly $1 over the past year and Saudi Arabia and Iran are expected to increase production, this variable also favors the incumbent party.
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