On the 3rd of November 2020 Americans will be called to the polls to cast a vote for the next U.S. president. This political event is of worldwide scale and will have a major impact on the financial markets. Whether it’s the Republican Donald Trump who will lead the US for another four years, or the Democrat Joe Biden, the markets are bound to be unstable for the upcoming election period.
According to the Presidential Election Cycle Theory, developed by Yale Hirsch and first published in 1967, just before the election presidents tend to shore up the economy to increase their party’s chances of being re-elected. Because of that, major stock market indices are likely to increase before each election. However, the theory is susceptible to events, just like COVID-19, which could affect investors’ behavior. Also, the time before the election of a new president, is characterized by uncertainty. This is because issues related to the country’s national economy, judicial system and the general direction it’s heading towards take center stage. Traders and investors don’t like uncertainty in the marketplace and they might behave in unpredictable ways.
BEWARE: The markets could be affected by the US Election 2020 and could be volatile until the presidential inauguration on the 20th of January, 2021.
The COVID- 19 pandemic has affected the whole world and the U.S. has been no exception. The country is now facing severe economic repercussions and increased social unrest. Along these dramatic consequences, COVID-19 will also play a major role in the election outcome and will continue to affect the US economy after the presidential election.
Markets love volatility and trading the elections could potentially bring on extraordinary trade opportunities and gains. However, this is a “risk on” period and the potential for loss is also great. Follow these best practices to ensure you make the most of trading the US election.
Have a trading plan
Build your trading plan around the markets' unique conditions and stick to it. No matter what.
Follow the elections news
Stay up to date with current events and study their possible effects on the US economy.
Manage your risk
Only trade a percentage of your funds and put stop-losses to avoid draining your account.
Hedge your portfolio
Protect your portfolio against potential loss with a thoroughly planned hedging strategy.
Not only do you get transparent and ethical trading conditions, security of funds and regular opportunities to boost your trading with special offers, we also guarantee excellent support to all of our clients.
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