How Election Season Affects the Economy
Elections have historically called for change for the better. Presidential candidates promise a near future of job creation and a booming economy. Their promises ring true for a short while following the election, when stocks go up and interest rates go down in favor of economic prosperity. But few businesses outside of finance know about the advantages that come with the election season—until now.
Neither Democrats or Republicans spell success for the stock market, but election years do. No matter the political party, the value of stocks have historically gone up after elections, with only two exceptions. Since World War II, stocks have gained following every election except for George W. Bush and Richard Nixon. No party seems to influence stock growth positively more than the other. The annual growth rate on average for stocks since 1945 has been 9.7% under a Democratic president and 6.7% under a Republican president. On the contrary, the greatest returns happened under Republican presidents working with a GOP-controlled Senate and a GOP-controlled House of Representatives.
The market typically surges following an election, for people have high hopes about the future and economic development. It’s only natural to follow suit with the rest of the country and invest in the future of America.
Another way your business can take advantage of an election year is to keep an eye on interest rates. Over the last thirty years, interest rates have fallen 1.5x more often than they’ve risen after an election. This fall in interest rates would allow your business to refinance with ease.
Here’s another interesting factor: in election years, hurricane season ends right before the election. Natural disasters also cause a drop in interest rates because of an uncertainty surrounding how much damage was done to an area. So hurricane season in an election year can be a double whammy creating incredibly low interest rates that your business can take advantage of.
While there are typically predictable economic outcomes following elections, this milestone 2016 election is demolishing past precedents.
Candidate unpopularity and political polarization have hit all-time highs, making market uncertainty greater than with past elections. With each side anticipating doomsday if their candidate isn’t elected, it’s hard to determine how stocks and interest rates will be affected. The best thing to do with this starkly red-vs-blue election is to keep a vigilant eye on market trends and to not let political ideology stand in the way of economic prosperity.