The US stock markets have spoken, or so they say. According to one leading indicator, the CFRA Research’s Presidential Predictor, Joe Biden will win the US election – by a whisker.

This predictor is based on tracking the S&P 500 (SPX), which fell 0.04% between 31 July and 31 October. CNN reports that since the Second World War, the incumbent president or party of the outgoing president has lost the election 88% of the time.

At the same time, when the S&P 500 rises during those same three months – the incumbent or party of the outgoing president has won 82% of the time. (The only inaccurate forecast by the Predictor was when the markets fell in the run up to the 1956 election, when President Eisenhower beat Adlai Stevenson despite an uptick in the stock markets triggered by the Suez Crisis.)

Until last week, the US markets had been pointing to a Trump victory even though most of Wall Street have been betting on – and hoping for – a Biden win.

But last Friday, the S&P 500 fell by 1.2%, enough to put shares into negative territory over the last three months.  So according to the Presidential Predictor, if you go by past performance, that would imply that Biden is going to win – not by a landslide, but by enough to slide into the White House.

Most of the big US investment houses have also been forecasting a blue wave across most of the country, with Biden winning some of those crucial swing seats which Trump bagged last time.

Most analysts predict that a victory for Biden will see the Democrats back with a majority in the Senate but also hold onto the House of Representatives.

Goldman Sachs and JP Morgan both predict a Biden win will be good for the stock markets as his mooted $2 trillion fiscal package will boost infrastructure spending, green energy, health care and education. What they also argue is that such a fiscal stimulus will add more into the economy than what will be lost as taxes are raised on wealthy individuals and companies. It will do so by a far greater a margin than if Trump were returned and continued to cut taxes. Moody’s Analytics estimate that Biden’s economic proposals would create 7.4 million more jobs and that the economy would return to full employment two years earlier than under Trump’s own plans.

Certainty – as far as that can ever be achieved – is what the markets crave most of all and that would come from a conclusive Biden victory. What investors fear most of all is a contested election or votes so close that there will have to be a recount, legal cases, and months of recriminations.

Such an inconclusive result would be the worst of all worlds, and worst for the rest of the world too, which hopes to see a calmer, more settled presidency emerge from the election. This is also true on the domestic front, which has been riddled with Trumpian rancour from the Mexican Wall to race protests and fights within the White House itself.

How Biden handles the Presidency overseas is the big unknown. He has been elliptical about how he will tackle Chinese relations and heal Trump’s trade war and less than forthcoming about the special relationship with Britain and future relations with the EU, with which he has been more than friendly.

On past form, a Democrat win would seek to smooth relations with the Chinese. He is also unlikely to want to annoy the UK, Nato’s second biggest spender after the US, and one of its biggest trading partners.

At the time of writing, the S&P 500 was up 1.7% after last week’s collapse, the worst weekly performance since March. (Tech stocks were not so happy due to fears that a Biden win will lead to reform, if not break-ups.) Across Europe, stock markets also bounced back after last week’s rout despite new lockdown measures and fears that we are heading for a double-dip recession. Investors are betting – or hoping – that Biden will just about squeeze into the White House.