Author : , Date : 10 October, 2016

How the US presidential election will affect financial markets

What can we expect during the election?

Binary options traders have an interesting topic to discuss about: the presidential election that will be held in the United States of America on November 8th 2016. US voters will head to the polls to cast their ballots, whether Hillary Clinton or Donald Trump will be the 45th president of the United States.

The US is continuously one of the leading economies of the world. Its market has come back strong recently. Stock prices have increased significantly and the dollar is strong, too. Furthermore, inflation is low, around 1 percent.

The financial market of the country is one of the favorites of investors, many binary options traders deal with US assets, with stocks of renowned US companies or with the US dollar. For this reason, it is important to know, what we can expect on the US market during the coming months.

What will change after the presidential election?

The two candidates, Hillary Clinton and Donald Trump have very different visions for the country, so the outcome of the election will have a large impact on taxes, health care and federal regulations as well. Decisions made by the new President will affect political and economic stability.
If Clinton wins, she is supposed to hike taxes by $1 trillion. This might be unfavorable for some market participants, but will balance the budget just like Bill Clinton did in the ’90s. The markets will behave similarly like under President Obama. A sideways movement is expected in the prices of US stocks and in the exchange rate of the dollar.
Trump’s win is likely to bring more changes in policy. If Trump is elected President, stocks might plunge. He plans to renegotiate the national debt, this might influence the bond market. The dollar might weaken. A Republican win can cause short-term fluctuations in US markets due to the uncertainty about the effects of Trump’s policies on the economy.

According to the Stock Trader’s Almanac, the Dow Jones index has posted bigger average returns under Democratic presidents in election cycles since World War II.

What should options traders do?

There is a great deal of uncertainty about the outcome of the presidential election. The election can cause excitement or despair, depending on your behavior as a binary options trader. If you are trading with US assets, either stocks or with US dollar, you definitely need to control trading even more consciously than you usually do, as most probably, there will be periods of uncertainty. The election might bring plenty of surprises.

Regardless of the result of the election, investors should plan accordingly. Successful investing needs a plan, setting time horizons and risk tolerance levels. During the election, you should risk no more than 5% of your portfolio in order to limit any bigger damage.

The markets will in no case collapse based on the result of the elections. So, nobody should panic. Just keep calm and keep analyzing the market.

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