Whenever there are US presidential elections, there are bound to be consequences in the capital markets. These may not be real or permanent. But for a while we see changing sentiments. This also throws many opportunities to savvy investors in the short run. 2008 is going to be another interesting year for all the Americans and the world because of the US presidential elections. These will have impact on many things. Affect on stock markets can be one of them.
In order to understand the above, close attention needs to be paid to policy statements of each political party and their candidates. Generally speaking the usual sectors that draw attention are the health, energy, financial, education, entertainment, defense and international policy sectors.
This is obviously one of the biggest and most important sectors. Every party has something to say regarding the health care plan. This has implications for private hospitals, pharmaceutical companies and insurance companies. Their stock prices may vary depending on the direction of policies. For example if there is a universal state sponsored health care plan, this can affect the share prices of a larger number of companies negatively.
In order to reduce dependence on expensive oil prices and tackle global warming, alternative sources of energy and environment friendly programs may attract more attention and investments. Financial Sector
More state control on this sector and increased regulation will affect share prices adversely of the companies falling in this sector. Any greater role given to public sector companies can also dampen the prices of a large number of private financial firms.
College and University education are sensitive to any policy changes relating to financing, loans, grants etc.
Government policies on spending on defense will have substantial impact on the earnings of defense related companies. Reducing or increasing government spending will directly affect these earnings.
For the industrial sector as a whole corporate taxation, direct and indirect taxation policies affects the share prices accordingly. It also needs to be seen as to how the parties propose to deal with budgetary deficits, falling dollar, credit problems, housing prices etc.
Playing it safe
Generally affects on stock prices of most of the presidential elections is transitory as the victory of any candidate is not going to substantially affect the earnings of companies overnight. There is always a good time lag. This throws possibilities of making money in both falling and rising markets. Certain stocks may move for some time but ultimately these may return back to their original levels. So it might be advisable to invest in those stocks which fall in post election period as these are likely to come back after some time..