Image Source: Freepik
Every time an election is around the corner, rising speculation on the candidate who will emerge as the winner significantly affects the financial sector. This time, it is Trump vs Harris, and the rising speculation allows investors to begin to consider the impact of the winning candidate’s decisions on the strength of their investments. However, many people still consider these as mere thesis and not anything significant. In this blog post, we will consider the impact of the US election on the financial trend both in the past and in this present phase.
Why is the US election special?
The United States became a superpower after World War II, leading the Cold War and aiding in the reconstruction of Europe through the Marshall Plan. This legacy has produced enduring connections and a robust network of sway.
When we talk of nations that have emerged to be what we call superpowers, they shine for their military, economic, or technological might. The World Bank estimates the US GDP to be approximately 26 percent of the global economy. This is unbelievable, especially when you think that there are about 195 countries in the world.
The US military leads the global military array with the most investment in military and defence. It has some of the most sophisticated war gadgets and intelligence units. In 2023, the United States was the world’s greatest defence spender, allocating an estimated $816–$886 billion to its defence.
Silicon Valley has proven to be a behemoth landmark with billions of dollars in value, making the US not only the center of technological innovation but also a place to consider a financial world power.
Related Blog Post: Stock Market: The Basics, Rules, and Success Tools
Financial Market: What is it about?
When it comes to financial discussion, most people are only aware of banks and credit organisations because a bulk of their financial activities are carried out across these realms. However, in the financial market, there are other avenues for people to engage in financial activities.
A financial market is a marketplace where assets such as stocks, bonds, currencies, and commodities are bought and sold. It allows businesses, governments, and individuals to trade securities, manage risks, and raise capital, playing a critical role in economic growth by efficiently allocating resources across the economy.
Related Blog Post: Who stockbrokers are and how they operate
What about the Presidential Election cycle theory?
Yale Hirsch’s presidential election cycle theory implies that the four-year presidential election cycle is linked to a predictable pattern in U.S. stock markets. Changes in fiscal policies, government allocation and spending, and investors’ feelings about political narratives prove Yale’s convictions on this thesis.
According to the theory, markets perform best in the second half of a presidential term, particularly in year three, when the current president attempts to strengthen the economy to be re-elected or to support his or her party’s candidate. This is quite relatable even in your nation; the sitting president tends to tilt towards the people’s sentiment as the election draws nearer.
Election is here: Proven Facts on the Stock Market.
There are quite a number of factors that affect the prices of shares as time goes by, including narratives around the company or a part of an organisation, Tech innovation, and many more. However, Charles Schwab researcher Lee Bohl conducted research. He analysed the market data from 1933 to 2015, and his research proved that overall, the third year of the president’s tenure correlated with the highest average market gains. Since 1928, the third year of the president has resulted in an average stock market gain of 13.5%.
Impact of President Trump’s first tenure on the Stock and Crypto Market
The first tenure of President Trump was in the year 2017 to 2021; during his first tenure, the stock market experienced a bullish momentum. The regulatory laws of the cryptocurrency landscape were also responsible for an increase in the growth of crypto tokens. These regulatory laws drew the interest of corporate investors and retail traders.
During his first year in power, the tax rate cut and deregulation gave the financial market a lot of momentum. However, as time went by and COVID-19 struck all over the world, this led to a sharp dip in the financial market. This was quickly corrected because of the intervention of the federal reserves and the stimulus package handed out by the government.
Notable Cryptocurrency breakthrough:
- Even though President Trump was sceptical about cryptocurrency, his decision did not negatively impact the ecosystem. His decision gave the market what I would call “the benefit of the doubt,” which was responsible for the growth it began to experience.
- Trump’s tenure began the inflow of institutional investors into the crypto space. His tenure provoked the interest of these investors to pay attention to cryptocurrencies like Bitcoin.
- Growing interest led to a spike in the price of Bitcoin, which rose from $1,000 to about $20,000 by the end of 2020.
Although BTC did not experience its fullest potential during Trump’s tenure, the effect of the stimulus package handed to the citizens during Trump’s tenure did not stop. Bitcoin later rose to experience a maximum price of approximately 69,000 dollars.
Is Trump still a crypto frenzy
As the 2024 election draws near, President Trump has publicly supported the crypto landscape, as opposed to his scepticism in his previous tenure. In fact, in 2021, Donald Trump called BTC a “scam.”
The narrative is different now, especially since some of those who have publicly supported his political ambition are pro-crypto. This does not mean he has a plan to leave the space unregulated or loose, but at least it’s a great sign that the space would be more friendly for institutional investors and retail traders.
Is Kamala Harris Pro-Crypto?
As 2023 wrapped up, a pro-crypto group comprising three Political Action Committees (PACs) decided to set their feet in the waters of politics by raising some funds for any candidate who was pro-crypto. They began to get funding from different enthusiasts in the crypto space and even surpassed their 78 million dollar goal by a large gap. Companies like Kraken, Coinbase and even individuals like the Winklove twins.
This decision would only spiral down into other pro-crypto fundings which have favoured the Harris campaign. The recent group called “Crypto4Harris” includes individuals like the billionaire crypto advocate Mark Cuban and Anthony Scaramucci. They have shown their support to Harris and even positioned her as a more favourable political leader for the crypto climate.
At different public functions, Harris has even announced her open-heartedness to walking the crypto landscape and ensuring that it is a win-win for everyone looking to explore the space the right way. At an October 14 event in Erie, Pennsylvania, Kamala Harris promised to implement clear restrictions for digital assets if elected. Following her statement, Ripple Labs co-founder Chris Larsen gave $1 million in XRP tokens to Future Forward, a major super PAC backing Harris’ candidacy.
Final Note
The political trajectory shows that the initial months following the election are going to be very bullish, especially because both candidates have proven their enthusiasm for the crypto space. However, this should not be the only reason why you would be making any investment in stocks and crypto, considering that these spaces are highly volatile and risky.
Leave a Reply