How the US presidential elections could affect the financial markets

With the US presidential elections looming, financial experts are turning their attention towards predicting the positive and negative affects it could have on the stock market.

By and large, US presidential elections don’t cause a massive swing in the market in either direction, but in a business where a sway of a few percentage points can have significant consequences, you can only expect the focus to intensify.

Historically, the US stock market gains momentum when the country has a Democratic president. As a result, financial analysts and investors would arguably want Democratic nominee Hillary Clinton to prevail.

Additionally, whenever a two-term president is leaving office and the country sees a new Commander-in-Chief regardless of who wins, the market generally proceeds with some trepidation. However, that uncertainty typically dissipates quickly, with the market rising around six percent within the first year of a new president's first term. This is lower than the average of years when a president is reelected, when the rise is closer to 7.5 percent, but an upswing is an upswing.

The most likely outcome is that the impact of the US presidential election on the stock market will be minimal, but some experts have warned that if either candidate does anything particularly out of character, it could arouse market suspicions.

According to financial services firm Commonwealth Financial Network’s Chief Investment Officer Brad McMillan, “one thing markets will be watching is whether either of the candidates comes across as, for lack of a better word, scary”.

A good example of this would be Hillary Clinton’s promise to lower the costs of pharmaceutical products a number of times during her campaign which is impacting on the share price drug manufactures. Back in August Clinton lashed out at EpiPen Maker Mylan on Twitter because of their recent price rises, Hillary tweeted “EpiPens can be the difference between life and death, there is no justification for these price hikes”.

The common consensus is that a win for Trump would have a much more significant impact on the stock market as a whole. But with Clinton having lead over Republican nominee Donald Trump from more or less the moment candidates were announced, it’s anticipated the market will be kept in check and any fluctuations will be limited.

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