Question

How U.S. presidential election affect the economy? (No Handwriting, Unique, Long Explanation)

Answer 1

ANSWER

• From a trading and investing standpoint, the basic rule of thumb regarding the marketplace of financial securities is simple: Traders and investors do not appreciate looming uncertainty. The U.S. presidential elections provide a voracious debate upon the direction of the country, and more importantly, provide uncertainty unto the marketplace.
• An election year is often a time of uncertainty for societies that practice a democratic or parliamentary form of government. Issues facing the nation's economy, judicial system, as well as future control over the government's legislative branch in coming midterm elections make their way to the forefront during the presidential election cycle.
• Although voting actively takes place during trading hours, the official electoral results are not available until Tuesday evening. The time lag effectively nullifies any potential impact of the election's result upon the marketplace during peak trading hours. As information systems technologies have advanced, exit polling data has become readily available to anyone who wants to seek it out; thus, the threat of insider trading based upon privileged exit polling data is not as great as in previous decades.

Presidential Election Cycle

• The impact of political events upon global markets can range from subtle, to substantial, to potentially catastrophic. One theory that attempts to establish a correlation between the result of U.S. presidential elections and the valuation of equities is the "presidential election cycle theory." In basic terms, the "presidential election cycle theory" is a belief that stock market trends can be predicted by the four-year presidential cycle
• Fiscal conservatism is the calling card of the Republican Party, with proposed monetary policy centered on national debt reduction and job creation within the private sector. The potential election of a Republican candidate is oftentimes construed as being a precursor to business-friendly legislation, lower taxation and a tightening of government spending.
• At the end of the day, economic complexities surrounding the dollar's valuation will be the driving force behind a sustained rally or prolonged downtrend. According to the presidential cycle theory, equities are likely to stagnate in the short term following an election, which could certainly hamper any uptrend in the value of the dollar. Ultimately, the U.S. dollar's long-term value is dependent upon many different factors, and the election year may just provide a few obstacles in the road rather than a complete change of course.
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