Updated: Nov 19, 2020
Interesting times, we are probably getting bored of this election campaign, which realistically began 2 years ago, however, whatever happens, there will be repercussions across the financial world.
Trump, who is the incumbent president, can be re-elected for a second term, keeping a Republican White House. If Biden wins, this could see a change of both leadership and Congress going to the Democrats. Alternatively, a contested vote can take place where the loser can question either the legality or the validity of the outcome. The variety of possible outcomes produces volatility.
Some traders love fast market movement and if you do, this is the time to take advantage.
This US Election is the big one! The US being the biggest economy in the world and its future policies and economic state have ramifications across the globe.
Let us look at what happened last time.
Examples of CNBC headlines following 2016 election: -
“Dow closes up 250 points; financials surge after Trump election upset”
“The price of gold fell back from the sharp gains made earlier on Wednesday, after a conciliatory victory speech from U.S. president-elect Donald Trump also helped the dollar rebound”.
"Oil prices rose on Wednesday, as U.S. financial markets bounced back from a early Brexit-like slide that followed Donald Trump’s surprise victory in the U.S. presidential election”.
The stock markets continued to break record highs the dropped following COVID and future sentiment.
Markets have usually been upbeat in the immediate aftermath of the election of a Republican president, because they generally have policies that support big business such as taxation and fiscal programs.
They loved Trump, tax cuts, helping the big Corporations against adverse foreign policy. He used the markets to cement his policy, until COVID.
Who will win this time??
No idea, the opinion polls put Biden ahead, but they did that last time with Hillary Clinton. The US is very partisan and a little swing each way can change the dynamic.
Looking too far into the future before the event is difficulty and not my forte. I want to look at opportunities pre-election and immediately after the results to find trades.
How do we take advantage?
Volatility, price movement of assets and currencies quickly and often steeply in a short period of time as well as quick retracements.
With the advent of electronic transactions and instant news, markets react fast, everyone wants to make money, right?
US dollar pairs, such as EUR/USD, USD/JPY and GBP/USD are likely to be volatile – as investors move to price in the effects of the likely winner’s foreign policies. Including trade agreements and the Trade War with China. We must also look at which economies are recovering better from the pandemic.
Safe haven Yen often finds support in these situations.
As investors try to piece together the effects of each candidate’s approach to international trade and taxation, they are intensifying positions as to a potential turbulent US presidential election and a probable messy aftermath. Again, increasing volatility.
Individual companies will also see movement with the winners’ policy direction influencing the sentiment of the investor. There are obvious winners and losers compounded by the economic crises created by the pandemic.
What will be the environmental policy of the new President, will support be given to alternative energy industries and as such will individual companies benefit? Will a Biden administration cause uncertainty in the Oil and Fracking industries? What about healthcare companies. The list is endless.
The prices of oil and gold are likely to also fluctuate. Futures traders will look at the elected Presidents policies and decide the direction. Again, giving online traders opportunities to react to the trends. Times of uncertainty often support the price of Gold and economic uncertainty does the opposite for Oil, as an example.
Historically, when a new party wins, the market gains have averaged 5% higher. In the alternative when the incumbent president is re-elected stock market returns usually increase by 6.5%. If one of the candidate’s contests the result, then this will cause wild swings in the market.
The brief examples above are to highlight the markets sentiment before and after the election and the volatility created by feelings, news conferences, opinion polls and tweets.
I do not want to be political, don’t really care, I just look at opportunities, some say the markets improved after hitting rock bottom during the banking crisis in 2008 and that Obama and the Feds policy set the foundations for this , my opinion is simple, if interest rates & bonds are so historically low, a good way of investing is looking at the stock market and trading. Look at the performance of the top tech stocks. Massive.
Volatility is here and often continuing until the inauguration of the elected president and may only settle once the markets digest the future policy and faith in the incumbent.
So, whatever the outcome in the coming weeks traders who like movement will find many opportunities and trends. If you want to speculate, let us help.
If you buying or trading assets the US Election will have an impact.
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