publish2018-02-19 3:31 pm

How the Country President Election Could Impact the Stock Market

The stock market is a reflection of the social, political, and financial situation of a country. Anything that can alter the previous or current conditions of any of the former three situations will have an impact in the stock market. The market reacts immediately to any threat to its normal peace, and to humanize it, we can consider that the market hates uncertainty. Therefore, how the country president election could impact the stock market are well anticipated or easily predicted.

president election

President point of view about the open market

Each time a presidential candidate is against the free trade, and he makes public his intentions to implement any control over the open market or limitations for the free trade, the country’s bonds lose value, and investors start to hesitate to keep their investment in the country. The Market tries to anticipate its future if the elected president is considered an obstacle to economic or financial freedom and development. The assets prices will fall, and the exchange rate will increase devaluating its currency. Indeed, the president’s opinions influence the stock market, and it responds immediately. There are several studies, which report a direct correlation between the presidential speech and the assets’ price. How the country president election could impact the stock market had been considered in hundreds of economy and financial thesis and papers with had proven a direct influence in the president election and different impact on the stock market could be directly linked to this phenomenon.

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President Economic Policies

The elected president or even the presidential candidates usually disclose their economic policies, to give a general perspective of it to their voters. It is considered extremely important for investors. Since the president will lead the country for the period he was elected, he has the power to alter, or modify the interest rates, exchange rates, apply measures to decrease inflation, etc.,

After the president economic policies are known, the whole country gets a risk assessment and the economic growth expectation for the period. The risk assessment agency will grade it, and the most investors will use this category for their investment.

If the new president economic policies are perceived as adverse, the stock market will suffer from low prices. On the other hand, if the new economic policies are considered beneficial and useful for the national economy, the stock market will raise its prices, and it will become stronger and more stable. The economic policies of the new government are probably the most obvious ways on how the country president election could impact the stock market.

Congress Support and Governability

The number of congressional representatives from the same political party of the elected president is of critical importance for governability and legislation approval. Each time the president-elected political party or its allies gain the majority of the congress, it is considered good for political stability. The political stability of a nation influences the stock market usually, in positive ways.  The stock market is built on trust; investor needs to have some level of certitude that their investment will be safe. The governability is another clear link to how the country president election could impact the stock market.

However, there are some elected presidents with terrible economy promises during the presidential campaign, which can be controlled by congress representatives from the oppositional political party. Under these circumstances, the stock market will show a positive response to the loss of the majority of the congress representative.

International Trade Vs. Protectionism

The country president election will determine the future of the country’s international affairs and foreign policies. The foreign policies influence the stock market. An open market to global investors and their ability to repatriate their capital without restrictions will attract more capital. It will positively impact the stock market. On the contrary, a foreign policy with market restriction will negatively impact the stock market. The country’s foreign policy is another example how the country president election could impact the stock market.

The presidential campaign usually addresses the country trade deficits, as a way to increase a candidate’s vote intention. If the newly elected president is in favor of protectionism, he can implement tax relief in an effort to promote economic growth and reactivate the industrial sector. The offering of several financial incentives for investors to open new factories, and increase their productions, or to those companies, which creates more than 100, new jobs, will benefit the stock market because investors will find them appealing and more money will be invested in the country with the best dividends and less taxation. The protectionism is another clear correlation on how the country president election could impact the stock market. It increases the stock prices and tends to make it growth as a positive response from the investor.

Furthermore, sometimes the president implements a heavy taxation on imported goods to stimulate national production and full employment. Afterwards, the stock market responds in a favorable way to it. The industrial and manufacturer sector become stronger and more productive, which leads to an additional positive response from the stock market. The former scenario shows how the country president election could impact the stock market by just his campaign promises or intended new economic policies

How the Country President Election Could Impact The Stock Market ?

Some of the country inhabitants, who consider it a trivial matter, could underestimate the president election repercussions. No everybody feels that the political or social changes would have any influence in their daily life or modify at all his normal peace. However, this is a rather simple approach to it. The economy is omnipresent in our society, and it affects everybody. The financial markets have an immediate response to any political or social changes, how the country president election could impact the stock market is evaluated by brokers and traders in their analyses, even as soon as the candidates’ names are known. The president election can influence the stock market prices in both ways. If the investors perceived the newly elected president as an ally, the stock market would flourish. On the other hand, if the president is perceived as a free market obstacle, the stock market will fall. The stock market is a reflection of the entire country’s situation.

 

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