The forex market was shaken by the election of President TRUMP, and investors were left with that uncertainty that would happen in the coming months.
An election year is often a time of uncertainty for companies that practice a form of democratic or parliamentary government. The problems the economy of the nation, the legal system and the future control of the legislative branch of the government in the next elections midterm make their way to the forefront during the presidential election cycle.
forex, brokers, skalping, exchange, market, capital, investment, capital, traders
From the point of view of trade and investment, the basic rule of financial stock market is simple: investors and investors do not appreciate the uncertainty threatening. US presidential election provides a furious debate about the direction of the country and, more importantly, creates uncertainty in the market.
Stocks, futures and currency markets are all interested in the relative strength of the US dollar and, ultimately, there is power based on the economic health of the nation as a whole. The presidential election in the United States have a major influence on the direction of the national economy and its potential impact on the USD can be significant.
ELECTORAL UNIT TRADE DAYS
Election Day in the United States following the first Monday in November Tuesdays. For the period dating back to the 1792 Presidential Election Day USA, it was celebrated as a national holiday. It was not until 1984 that the stock market was open on election day, and the reason why the market providing a necessary service public.1) Back then argued skeptics cited insider trading could be a big problem, use exit polling data to take positions in economic sectors likely to be affected by the outcome of the election. Over time, the screams of the skeptics were drowned and open trade on election day were the norm.
In today’s electronic marketplace, all operations are open on election day. Currency markets are open during their regulares2 hours) and CME Globex futures market, NYSE and NASDAQ on.
Though the vote is actively taking place during trading hours, the official election results are not available until Tuesday evening. The time span effectively cancels any potential outcome of the elections in the market during peak traffic impact. As technologies have advanced information systems, data from exit polls readily available to anyone who wants to find him; Therefore, the threat of insider trading based on privileged reconciliation of data output is not as large as in previous decades.
PRESIDENTIAL ELECTION CYCLE THEORY
The impact of political events in global markets may vary from subtle to significant, potentially catastrophic. A theory that attempts to establish a link between the outcome of the US presidential election and the valuation of the shares is the “theory of presidential election cycle.” In basic terms, the “theory of presidential election cycle” is a belief that the trends in the stock market can be predicted by the presidential election cycle of four years.3) theory is from 2004 and was developed by historian Yale Hirsch market 0.4)
In practice, the theory of the presidential cycle breaks the performance of shares in accordance with the presidential term of four years. The first year after a new president is chosen often seen the weak performance of shares. During the second year, conduct the stock shows a gradual increase over the years, showing three four strongest returns. Many reasons for the appreciation of the shares in years three and four have been quoted, with popular explanations ranging from successful changes attributed to the new administration policies to dwindling uncertainty facing the market in general.
Of course, like everything that has to do with investment and trade, the rule may be fallible and an oversimplification. An example of the theory is ineffective happened in the election year 2008, with the Dow Jones Industrial Average added an annual decline of 33.84%. 5) According to the theory, would the four year presidential term be the strongest year 2008, but dropped dramatically below expectations theory.
An important warning to the presidential election cycle theory is based on four-year cycles and no special emphasis on the last year of a two-term incumbent president. Since 1900, the S & P 500 had an average of 11.5% and increased to 83% of the time in the fourth year of the presidency. But in the same period, the S & P 500 dropped 1.2% in the eighth year of a two-term incumbent president, with the market posting gains only 44% time.6)
Presidential cycle theory exists only as part of the overall picture concerning the future strength of the shares, and indirectly, the future strength of the US dollar. As all indicators, the theory has its supporters and opponents, with most investors and traders respect for theory as a timing device to be added into or leave the market.
Anticipating the new currency movements POLICY OF PRE ELECTORAL UNIT MARKET
The “strength of the dollar” is a popular theme in the rhetoric of the election campaign nearly all the candidates running in the presidential election. The promises of job creation, reduction of the national debt and the creation of a strong national economy are often vehicles for which a candidate promises to deliver a strong dollar. It is true that both the Republican and Democratic parties are agreed that a strong dollar is in the best interest of the country. But the means to achieve this goal is very different.
MONETARY POLICY: Republican Party
Fiscal conservatism is the map of the Republican Party, the proposed focus on reducing the national debt and job creation in the private sector monetary policy. The potential election of Republican candidate is often interpreted as a precursor to legislation favorable to businesses, lower taxation and a tightening of public expenditure.
In the election term review in 2014, it was expected that the Republican Party took control of the US Senate and introduce legislation that will question policy low interest rates and practice quantitative easing from the Federal Reserve in the United States. In the days before the elections and in anticipation of the outcome of the elections and possible change of policy, the USD was traded to perennial highs against the euro, Swiss franc and yen japonés.7) Although an example isolated and away a definite correlation of the midterm elections in 2014 they illustrate the relationship between party politics and monetary policy against the USD. As election data were more concrete in the days before the election, traders found reasons to buy the dollar, expecting a tightening of interest rates and long-term strengthening of the currency.
MONETARY POLICY: Democratic Party
On the opposite side of the political aisle in the USA is the Democratic Party, with monetary policy objectives focus on job creation in the public sector and increased public spending. Support legislation issues like universal health care, the right to education and extensive public works projects attributed to democratic government policy. Investors and traders are often bearish on the potential choice of the Democratic leadership, because of the extensive group of the Democratic Party to the principles of socialism, big government and higher corporate taxes.
The presidential election of 2012 provides an illustration of the market in an election in which Democratic candidate comes to mind. As the disputed election were often seen as a revolt of political experts, and currency markets showed how precarious were the “experts”. Adjusted annual contribution, with a slight variation in exchange rates valuations were frequent in EUR / USD, USD / CHF and USD / JPY.8) something static conditions at these important market pairings are usually in dollars Next the result of a period of uncertainty, and a commercial approach to “sit and wait” is adopted by traders and investors.
Through 2012, many individual trading sessions involving them over USD was volatile and chaotic. But when comparing annual yields non-election year, trading ranges of the greatest USD for 2012 could be characterized as relatively moderate.
Negotiations on large bonds USD in the race until the midterm elections in 2014 and 2012 presidential elections can be helpful when how different assessments of USD studied can behave when faced with different situations election year. Essentially, forex traders and investors behave almost unpredictable when faced with the uncertainty of the outcome of an election. Some are content to sit and wait while other times the possibility of negotiating seems too good to pass up.
At the end of the day, the economic complexities surrounding the valuation of the dollar be the driving force behind the sustained recovery or a trend towards prolonged low. According to the theory of the presidential cycle, it is likely that the measures estancen in the short term after an election that could certainly hinder any uptrend in the dollar’s value. Ultimately, the long term value of the US dollar depends on many different factors, and the election year can provide some bumps in the road instead of a complete reversal.