Software & Finance - Monthly Magazine Online

Volume 2 - Issue 8

August 2012

US Election and Stock Market Direction

Let it be any country politics plays an important role in business and economy. The reason is the parties participating in the election would have different policies regarding tax credit, windfall tax, budget criterias that would affect the business a lot.


Government can control the unemployment rate, commodities prices and inflation by playing with the key interest rate. Of coure, they may also create bubbles in stock markets and all bubbles are created to burst. This scenario is inevitable. Let it be any security or fund, it can not stay on the top always. Either it can move down and move up.


Usually when the market is getting ready to make the correction, market will usually make an vertical move more than close to 80%, to create a huge panic in the market by short covering rally. The most of the short positions created by novice investors are forced to cover at a high price. Hedging is a good strategy compared to stop loss orders. Since stop loss orders usually trigged automatically and conseuqently it will have domino effects on other investors short positions.


During the election year, when the market is not doing good then it would be favorable for the opponent party compared to ruling partly. Ruhling party always wants the market to go up especially during election year and they want the inflation to go down so that people will enjoy the low gas prices. It can be achieved by keeping the interest rate low and having stronger US dollar policy for the short term.


There is nothing new under the sun and lets wait and see what this year election will manifest!.