The US Election: How Do They Influence Financial Markets?
Joe Biden or Donald Trump? Whom do you support?
Well, we are now at the climax phase of the US presidential election, one of the most influential political events worldwide, waiting for the final result. Putting the election result in front, many of the traders are wondering what’s going to happen on the financial market next.
Well, the result will undoubtedly influence the market as we are going through many new and old global crises like COVID-19.
The USA is one of the major continents that hold around 18% of the global GDP with the military superpower. Also, it holds a significant impact on world politics and economics. So, its presidential election is something that can grab the attention of every pair of eyes of the world.
No matter who is the ‘president-will-be’ has a great deal ahead.
Why? Because he has to wrestle with the current pandemic crisis as well as all the other existed problems.
And so the financial market behaviour may reflect according to the election proposal and initiatives he proposes to implement.
So, let’s take a quick gaze at the proposal lists of both the candidates so we can predict what might happen next in the financial markets.
The US Election - Presidential Proposal List
During the formal announcement of joining the 2020 presidential race, Joe Biden declared that his focus is on the workers who built this country and the values that can bridge its visions.
As for Donald Trump, he is standing on the remark “Make America Great Again”.
Proposal That Came From Joe Biden
Joe Biden as the representative of the democratic side includes many major current issues including economic recovery, jobs, healthcare, housing, racial, economic inequality, gun and violence control, climate change issues, and so forth.
- Rising the federal minimum wage to $15 (£11.50) per hour.
- expand the public health insurance scheme passed, protect the affordable care act, and minimize the healthcare coverage cost to 8.5% of a person’s income
- $1.7tn federal investment in green technologies research to fight climate change
- Increase the corporate tax rate from 21% to 28%.
- Increase the tax rate for individuals who have an income level of more than $518,400 from 37% to 39,6%
- Provide Pandemic affected businesses interest-free loans.
- Free four-year public college and university education for students whose family income is less than $125,000
- Investment for the economic development of communities of colour
- Closer ties China and repairing with NATO
Words From Donald Trump
On the flip side, Donald Trump as the Republican representative announced that he would work to bring back the economy, boost jobs, protect US trade interests, and to continue with his hard-line stance on immigration.
- Tax reduction to keep jobs in America
- Tax breaks for goods produced in America
- For the second round of $1,200 stimulus checks for economic relief of COVID-19
- Ending the ‘reliance’ on China and protecting US manufacturing
- Creating ten million new jobs within 10 months
- New one million small business creation
Potential Influence Of US Election On Trading
High Volatility and Uncertain market condition is the most conventional after-effect of the Presidential election.
It is noteworthy that the financial market and economic impact that any president can have highly depends on their ability to enact legislation.
There might be complete opposing outcomes in a certain sector based on who the winner is. So, it will be wise to take necessary measures according to your favourable assets and what effect might both the candidates can play on them.
Let’s count the following assumptions on different trading fields.
Trump’s total political policy and trade war against China may lead to the strengthening of the US dollar as well as US bonds. Trump’s foreign policy towards the EU might cause a decrease of EUR and GBP against the US official currency.
However, if Biden becomes the winner, then the opposite result might happen as he believes in building a good bond with China.
The dropping of the US dollar may lead to the rising of Gold prices. Biden’s tax policy and another stimulus also result in a similar incident.
On the other hand, Trump’s victory may make sure that oil and other related ETFs drop because of the increased supply.
The victory of Donald Trump will make the stock market grow higher as he has a keen focus on the stock market on his politics. However, American technology and vehicle sector-related stocks might be rise higher as both of the candidates have envisioned the development of these sectors.
History says that the volatility of the S&P 500 is much higher during the election year than usual non-election years.
So concluding, though we have written this article based on our assumption; still, we can hardly predict any concrete scenario about the impact of the election as anything might happen anytime, depending on other geopolitical and economic events.