The next presidential election is still over a year away, but that doesn’t mean that investors are not paying attention to the candidates, their policies, and how it will affect their portfolios. Even if you are a short term trader, you need to be aware that outside events like this have a major impact upon the prices of the assets that you tend to focus on.
First, look at the candidates that have the most realistic chance of winning. The big names in this upcoming election are Hillary Clinton, Ted Cruz, Rand Paul, and the newly announced Donald Trump is beginning to make a splash in the polls, too. If the election were held tomorrow, it’s likely that one of these four would win. Many others are declared candidates, and things could change very quickly for any of them. It is still way too early to tell what will happen, however.
Next, keep in mind what their policies will most likely be. Looking at party guidelines is often helpful. For example, Republicans tend to be pro-big business, and that’s good for stock prices. Democrats tend to favor lower class individuals, and it’s sometimes the companies that pay the price for this. There are exceptions, of course, but over the last several elections, a Republican win has helped stocks and indices, while Democratic wins have hurt them. This is over the short term, of course, but that is our immediate focus for now. Donald Trump especially has a reputation in the business world, and has been an open proponent of fewer regulations on business. There could be a big surge in the major U.S. indices if he is elected.
You will also want to see what the new president has to think about President Obama’s economic policies. Are there going to be likely changes to policy or to the Fed? What about how the Supreme Court interprets financial law cases that come before them? These are tougher things to interpret, but they do matter. Looking at political blogs and news once in a while will help you to gain a better perspective on these things.
Really, what it comes down to is trying to guess how the public will react to election news and changes in polls. Sometimes, a change in polls will accomplish nothing. Sometimes, it will change a lot. The biggest market swings will occur after the election is finalized, especially if there is a surprise in what happens with the outcome. Major trading institutions, like banks and insurance companies, look to the primaries to try and gauge what will happen with the economy.
November 2016 is a long way away, but these are things that can be worthwhile to think about now and begin outlining trading strategies now. President Obama has had some very clear economic policies during his tenure in office, and a lot of them have benefitted banks and insurance companies–especially health insurance companies. Watching to see what happens as the inevitable changes take place with these, and especially with the Affordable Care Act, will give you a good frame of reference for how to formulate a trading strategy. Banks have had such a huge influence on the rise in stock prices lately, and their presence within the major indices cannot be denied. This is a valuable tool even for binary options traders that focus on the Dow Jones Industrial Average, the NASDAQ Composite, or the S&P 500. There are so many opportunities for trading at a profit off of this type of data; how you go forward with it is up to you.