“When Markets Are Right” is a recent article in the Wall Street Journal (WSJ). In it author Michael D. Murphy talks about how and why markets respond to events like the upcoming presidential election.
The author notes that markets react as much or even more than we do to the events that occur within them, like when a fire breaks out or when a plane crashes. “There is nothing wrong with this,” he states. “It’s a normal process that occurs in all markets.”
So, how will markets react to the upcoming election? It is likely to be more of a seller’s market and buyer’s market than it has been in the past. It is possible that the stock market could continue on its record-breaking rise, but only if the economic news of the day is positive.
For the most part, investors are looking for economic news that reflects better economic conditions in the coming months. That would indicate that interest rates are likely to remain low until at least the election is over and President Obama is no longer in office. With that said, one may ask: Will the Federal Reserve raise interest rates before President Obama is inaugurated? Some investors believe so, while others do not.
Another economic news point expected to affect the stock market is the upcoming government stimulus plan. Although President Obama is expecting to make a big pitch for his plan at the second presidential debate, there are many who believe that the stimulus plan will not be nearly as effective as some believe it will be. It is also expected that it will be more focused on tax breaks and other forms of monetary help rather than on the debt or deficit. The hope is that the government will use the stimulus plan to bring down the budget deficit, which could lower the interest rates on home loans, and thereby encourage consumers to refinance their mortgages, which is often a main point of contention between borrowers and lenders.
Finally, there is a chance that economic news surrounding China may influence the way markets react to the 2020 US presidential election. Although President Obama has been adamant that a trade war between the US and China would be disastrous for the world economy, that idea may not be quite as bad as some would think. On one side you have President Obama and his administration, on the other you have Chinese officials and their government. The former believes that it is possible for the two countries to work together to benefit from economic competition, whereas the latter believes that China can help America by flooding the American markets with cheap goods.
If President Obama wants to keep his campaign promises to get America out of the recession, he needs to show some signs of success. However, that will come with good economic news. If he does not, it could make it harder for him to push his agenda and cause investors to stay away from stocks.
One can only imagine what will happen in the coming years if President Obama does not focus on how his actions will affect the markets. In fact, it is easy to see how markets might react to the next few elections as well. How will investors react to how President Obama’s administration handles trade agreements and other economic issues?
The political climate in the United States is not good at the moment and so the market will likely not have much to say about how will markets react to the next election unless something happens to change it. The market will likely continue on its way and there is every reason to expect that the election cycle will go on without a hitch.
Once the new administration is installed, however, things might start to change. and the economy might get a little better before the elections do.