In an election year filled with volatile health and economic turmoil, can one political party have a better impact on the market this November?
The year 2020 will certainly be one for the books. It has already brought on twists and turns in a variety of forms ranging from a health crisis to economic collapse to cancel cultures and social movements all against a backdrop of a highly anticipated election year, further politicizing every current event.
Given these unprecedented times and financial volatility, analysts and expert must weigh the political climate when assessing and predicting the trajectory of the market. Since gold has seen a significant increase, will it remain to climb? Precious metals in their entirety have seen an increase so it does make you wonder whether it will be affected. For that, we have to examine the history of different parties in the white house and their effect on the stock market as well as how the market performed on election years in the past.
It seems that every four years we talk about how this year’s election is the most important one ever. People will make sweeping statements about their party or “team” of choice will lead financial markets to climb with the opposing candidate causing an economic meltdown or other catastrophic events.
In truth, the party is a fairly rough guide to how a president will govern. Is a Democrat today really the same as a Democrat from the 1920s? Or even more recently, is Trump the same as President Bush? The answer is an obvious no, but it does give us some sort of guide, however imperfect it may be.
Beyond looking at the political party, what further determines an election year’s impact on the economy and market is the Presidency itself, that can stay with the same party as the current President, or the new President can be from another party.
It may seem at times that the presidency switches parties due to the economy not being particularly strong, however, it could very well be the campaign that’s driving the market.
An independent study covering the years between 1926 to 2019 suggests that there is essentially no difference between the historical average returns of unified Republican and Democratic administrations, but changes once the administration is divided.
Does that mean the market will do better under a democratic president? Not necessarily. President Obama was able to elevate the economy post-2008 crash, however, President Trump was able to boost it even further while lowering unemployment rates to below 4% until the spread of Covid-19 so where does this leave us for the 2020 election?
This is where the details and situation come into play. At the end of the day, whoever takes the White House this November will inherit or continue overseeing an economy that’s been held together with dried duct tape and a Federal Reserve stimulus following the pandemic crisis.
Overall, the market’s performance will likely depend more on the Fed’s ability to eventually wean it off the stimulus rather than on presidential policy after the election.
We’re seeing the effects of the weak economy and dollar decline daily despite or even in spite of the Fed printing more and more money to stimulate the economy. With the national debt increasing by the trillions, a looming recession, potential bank collapse, and a dollar decline affecting our daily lives, we’re in for a long journey that will likely stretch over years to come regardless of this election’s results.
Concerned about how the economy will affect your financial security? You’re not alone. Investors are increasingly opting for ways to diversify their portfolios with safe-haven commodities like gold to hedge against inflation.
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