The president elections in US impacted financial markets since the beginning of the election process. Dollar, gold and stocks volatility rose above the normal. Mexican pesos saw 2% growth. Gold dropped that much. And one week till the elections things got dramatic. Dollar index fall 1. 42%, S&P 500 saw 1.94% drop, in contrary gold started to rise and became 2.38% more expensive. Economists try to explain and predict market move. Let’s first look into general information.

Elections impact financial markets in every country. A research made from 466 election period in 79 countries between 1980-2006 shows that investors become less sensitive to the price during elections. This lack of interest can be up to 40%. It depends on democracy, corruption level and level of government involvement in business. In us investors become 20% less sensitive to the price during the elections.

This is because of the possibility of elections to change economic situation. New president can cause legislative or policy change that can cause prosperity in one sphere and decline in another, or may open new possibilities. Investors also can behave because of political loyalty or rivalry.

Political rhetoric also has strong influence on market during elections. Politician’s one critic can crash whole market. For example Hillary Clinton’s words in twitter caused crash in biotech stocks.



Historical data shows that financial markets rally during elections in US. Market performs better when incumbent participates in election. Also market behaves differently depending on which party is winning as stock historical performed better during democrats ruling. During democrats stocks gives 7.9% return but it is just 3% for republicans.


If we will take S&P 500 index as a sample we see that it fell 2.8% in average when incumbent does not take part in elections. Also we see that index gives 55.3% return during democrats and only 23.4% during republicans.



USA PRESIDENTS ELECTION 2016

This information shows that market favors Hillary Clinton. She is from Democratic Party and she is seen as a continuation of incumbent policy.

What do candidates offer?

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HILLARY CLINTON


• Increase taxes for those making over $5 Million

• To Prevent tax “inversions” where companies move headquarters overseas

• Stimulate job growth by giving tax credits for long-term investments and new hires

• increased regulation on financial sector





Hillary Clinton emphases issues like college affordability, income inequality, and workplace policy reform and demonstrate her attention to Americans' basic economic concerns. She has more progressive approach to Wall Street reform, gay rights and criminal justice reform. On foreign policy she mostly stood behind the record of President Obama.



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DONALD TRUMP

• Cutting corporate tax rate from 39% to 15%

• Simplify tax brackets and reduce taxes across the board

• Increase jobs by decreasing regulation on energy production and repealing Obamacare

• Repeal Dodd-Frank legislation






Donald Trump has more radical offers that bring uncertainty to the market. His tax plan would cut taxes by $11.98 trillion over the course of a decade, lead to growth in the GDP, higher wages and larger capital stock as well as 5.3 million jobs. However, it would also reduce tax revenues by $10.14 trillion and dramatically increase the deficit and budget debt.
Immigration remains a major pillar of his campaign. Economist thinks in case Trump will succeeds in his plans related to immigrants the industries that depend on immigrant labor would suffer. Farm incomes will drop food prices will raise. It will leading to decreased revenues for local businesses and a loss of American jobs.
Market’s negative reaction to Donald Trump’s rating shows that market is not happy with him to become president. His rhetoric about Muslim immigrants, Muslim citizens of us, immigrants, relations with Mexico and China accepted as a break of stability and reason for uncertainty. Which is why market buys stocks and dollar when chances of Hillary Clinton rises and sells when Donald Trump’s rates rise.
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