Trump Vs. Biden: Elections Affecting the Stock Market
As we are just a few days from an election, we have been seeing the stock market completely plummet in the last few weeks. Many investors are worried about what a Democrat or a Republican president could mean for the stock market.
This week could be the moment of truth for traders who have recently been holding off due to the highly anticipated election.
According to MarketWatch, “The Dow closed 6.5% lower for the past week and the S&P 500 lost 5.6% over the same stretch, while the Nasdaq skittered 5.5%.”
That is the lowest we have seen since the beginning of the pandemic in March.
Investors hate the unknown especially considering our economic circumstances with Congress battling it out for another relief package to combat the harm from the pandemic.
As rises in COVID-19 cases are soon reaching new records and a possibility of the position of power changing not only for the White House but for Congress brings even more uncertainty.
More legislation could shift the markets within the next year. As we witnessed the 2016 political election, a popular vote may not always be an indicator of our next leader, making this election one that is uniquely uncertain.
Of course, the night of the election has little impact on stocks but rather the policies specific to each combination of executive and congressional control.
According to Yahoo Finance, “Analysts at U.S. Bank found that stock markets gains averaged 6.5% when a president was re-elected or if one party kept control of the White House.”
Investors will not only be holding their breaths for the presidential election but will be looking for the possibility of a change in control of the White House.
Both presidential candidates have completely opposite plans ahead for the next four years.
Biden plans to expand in government-run health insurance while also increasing higher corporate tax rates.
If Trump gets re-elected, lower taxes and relaxed regulation would greatly benefit the telecom and energy sections, however, renewables could face pressure.
However, if Biden wins but the Democrats could flip the Senate causing another shift to tax and spending policies.
With recent job reports for the month of October, it also put into question how the candidates plan to increase jobs in the midst of the second wave of this virus.
While their policies differ greatly, the S&P 500 has been a giant factor in predicting the elections throughout history.
According to CNN, the S&P 500 fell 0.04% between July 31 and October 31.”
Meaning that the market forecasts that Joe Biden will win, according to CFRA Research’s Presidential Predictor.
When the S&P falls during the three months leading up to the November vote, the incumbent president has lost the election 88% of the time. Then when the S&P 500 rises, the incumbent or party of the outgoing president has won 82% of the time.
However, it has been a close call these last few months as Trump led the way for months before.
Some even believe that the sell-off leading up to Election Day gives the market less downside risk to a result.
Matt Maley, the chief market strategist at Miller Tabak, stated, “Even though we’re worried that there could still be one more wave down if we get another big influx of uncertainty, we think the stock market is now setting up nicely for a nice net advance over the next two months or so.”
The FED plans to meet on Thursday, Nov. 5th, and plan to still maintain support for the economy regarding pushing interest rates to near zero and snapping bonds despite which candidate could win.
All these causes lead investors to worry about their own investments.
It is with great interest to maintain a diversified portfolio or use a Robo-advisor to help with the adjustment to any dramatic changes in the next few months.
It is unlikely that a candidate will be decided on Tuesday but rather for the next coming months but it important to know what investors are up against in regards to their investments.