Presidential election years in the United States aren’t just pivotal political events, they also mark significant periods of change and opportunity in various industry sectors, in both local and global scale. The run-up to elections often brings heightened attention to policies that can reshape industry landscapes and global trade agreements, making it a crucial time for traders to monitor and adjust their strategies.

During election years, the promises, plans, and projects of presidential candidates, along with the broader political climate, can have a heavy influence on investor sentiment and market trends. In this article, we’ll go through the key industries affected by the presidential election years, such as healthcare, energy, defense, and technology.

For traders, it is essential to observe and understand these patterns as an additional layer of security and confidence when making their trades. US presidential election years offer a chance for traders to capitalise on market movements which arise due to this political event.

Historical trends during US political elections

The impact of US presidential elections on various industries can be traced back through several election cycles. US indices following major US companies, such as the SPX500 (S&P500) and US30 (Dow Jones Industrial Average Index), are highly sensitive to election outcomes.

During election years, the healthcare sector frequently becomes a focal point, as candidates' policies on healthcare reform can signal major changes for insurance companies, pharmaceuticals, and hospital corporations.

The 2016 election between Donald Trump and Hillary Clinton saw the healthcare sector fluctuate due to debates over the Affordable Care Act. The energy sector, too, often sees considerable movement. In election years like 2008 (Barack Obama vs John McCain) and 2012 (Barack Obama vs Mitt Romney), policies on renewable energy and fossil fuels heavily influenced energy stocks. Renewable energy companies, green energy ETFs, and commodities such as Natural gas tend to receive more attention during Democratic campaigns, which traditionally focus on sustainability.

It’s important to note these historical trends as patterns repeat. Should 2024 US presidential candidates take on a similar stance, there’s historical data that says that a similar effect may take place.

Political policies and market impact

The policies proposed by presidential candidates can have far-reaching effects on various industries, even outside the US. A candidate's stance on trade agreements and ratifications, for example, can directly impact industries dependent on international trade, such as manufacturing, retail, and agriculture. This was evident in the 2016 elections, where discussions around NAFTA and trade relations with China influenced major market volatility across the world.

US presidential election years often impact consumer goods and retail sectors, primarily through changes in consumer confidence. The public expecting tough times due to a US presidential candidate’s proposed fiscal policies will change their consumer spending patterns.

Technology and defense are also closely tied to presidential policies. Changes in defense spending can directly impact company stocks in the aerospace and defense industry. Similarly, technology companies are sensitive to policies on issues like net neutrality, data privacy, and trade relations, as they can affect operational costs and market access.

Lastly, the overall sentiment on US presidential candidates can heavily impact the forex industry, specifically the USD’s perceived strength against other currencies. A presidential political candidate that appears weak but is touted to win can severely weaken the dollar, causing currency pairs like EUR/USD to appreciate in price.

For more information on how forex is affected, read our article on Foreign policy and forex: how US presidential elections influence global currency markets.

Riding the volatility and market swings with ThinkMarkets

Uncertainty about election outcomes and subsequent policy changes can lead to heavy swings in the markets.

For traders, these election years present a good mix of challenges and opportunities. The key to successfully riding out this volatility and the market swings is a deep understanding of historical market trends, anticipation of policy impacts, and a strategic approach to trading. This is where ThinkMarkets comes into the picture.

At ThinkMarkets, traders gain access to an extensive suite of tools and resources designed to provide insights into market movements and help in making informed trading decisions. Some of the powerful features that ThinkMarkets traders can utilise include Traders’ Gym, our proprietary backtesting tool, Signal Centre, an FCA-regulated trading signal provider, and TrendRisk scanner, our app-exclusive market scanner.

Stay ahead of the curve by signing up with ThinkMarkets today!

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