Presidential elections tend to have a profound impact on U.S. stocks, if only because the impact on the stock market mostly occurs as a kneejerk reaction after the election, and not necessarily because of policies that the winning candidate puts into play during their time in office. As a rough example, a Republican winner of the presidency typically sends stock prices up on the first Wednesday of November, while a Democratic winner sends stocks downward. Republicans have long been seen as the party of big business while Democrats as the party of the disadvantaged because of their larger tax policies.
This November, regardless of what happens on Election Day, that immediate kneejerk reaction is likely to be the same. Most people view Donald Trump, the Republican nominee, as a president that will further businesses. He’s a businessman himself, and he wants to help businesses to succeed. On the other hand, most people view Hillary Clinton, the Democratic nominee, as someone who wants to raise taxes—which will most heavily impact businesses and drive down stock prices. Regardless of who the winner is on the first Tuesday of November, that mindset is likely to impact stocks Wednesday morning. As a binary options trader especially, this can create great opportunities for short term trades as you ride the emotional rollercoaster that will be running through world markets, hopefully by taking away a big short term profit because of your understanding of market psychology.
The real impact, the lasting one, begins once the new president starts influencing policy. This likely won’t even begin to happen until mid-February, 2017. And understanding what a candidate’s true wishes are can help you to prepare for this. For example, Clinton has stated her intentions of enacting a massive plan to help small businesses in the United States to relieve their tax burden. Her husband did something quite similar when he was in office during the 1990s. And although it didn’t end well for Bill Clinton thanks to the tech bubble bursting right at the end of his time in office, for the most part, the economy did very well under him. The same is true of President Obama. He inherited an economy that had suffered quite a bit thanks to the real estate and housing market issues that originated at the end of President Bush’s last term, and the major indices have all seen record highs during his eight years in office.
That’s not to say that a Republican president will not be able to stick with party platform. President Reagan inherited a poor economy from his predecessor and revolutionized the country with new concepts like “Trickle Down” economics. In fact, many people still refer to this as “Reaganomics.” President Bush inherited a country still reeling from the violent burst of the aforementioned tech bubble, and created a strong economy out of that, which was only brought down because of shady policies when it came to lending in the real estate market. In other words, the Republican party, although reputed to be great for business, can only be great for business if the Congress and the overall economy allows it.
We don’t know what the result of the upcoming Presidential election is going to be. Whatever happens, it’s important to know how elections impact economies, and what really happens. One is pure reaction, while the other is a set of complex inner workings of many different components. You can make some quick dollars trading the big stocks and indices after the election based upon results, but the real and last profits won’t happen until that President takes over and gets to work.