How the President Effect the Stock Market

During the recent elections we have seen many fluctuations in the stock market, but have you ever wondered if the actual election can affect the stock market and how the stock market can affect the election? In Kiplinger.com’s article how the presidential elections affect the stock market, they discuss how different aspects of the elections can affect certain aspects of the stock market and how in turn you can generalize the election outcomes based on the stock market.

The first aspect of a presidential election that is discussed in the article is that Presidential terms are broken into two year cycles. The first two years Wars, Bear Markets, and Recession’s tend to happen while in the later years of a presidential term more prosperous times happen. The interesting part is there is data to prove it. “The Dow Jones industrial average has gained an average of 10.4% in the year before a presidential election, and nearly 6%, on average, in the election year.” states Anne in her Article. And on the first two years of the president’s term see average gains of 2.5% and 4.2%. While this may cover all electoral parties the article then delves into who is better for the market Republican or Democrat.

While you may have your preferred preferences in which party to vote for the market also has its preferences too. While most people would assume that the Republican Party would be good for market due to its “business friendly” stance, the article points out that democrats are actually better showing since the 1900’s the Dow up on average 9% for Democrats while Republicans show a growth of 6%. The article warns not to base your investments based on which party is in the oval office, the article points out that “normal variations in annual stock market returns dwarf that difference” and so investment decisions based off of the party in office is unwarranted.

Now we have seen that certain parties can have an impact on the stock market the article then delves into a slightly iffy section, whether or not the stock market