Effects of Political Elections on the Economy

CNBC surveyed some of the country’s top financial minds to get an idea of how the upcoming presidential elections are currently effecting the economy, as well as the impact we can expect long term based on who wins the elections. 56% of those who were questioned felt that just the process of going through a presidential campaign has a negative impact on the U.S. economy. Many of these professionals such as Jim Bianco from Bianco Research, agree that this negative impact will be magnified further should there be a contested convention, as many are suggesting could happen. In another question that was posed regarding the outcome of the election 40% felt that a republican win would have the best economic result, 18% said a democrat winning would be the best for the economy, but 42% said it doesn’t matter. This final stat is the most startling as this has not been the case in previous elections and lends itself to the idea that many people have come to believe that political impact is overstated and has less effect on the economy than it once did.

When asked about which candidate has the best policies for the economy, Governor Kasich ran away with it with 42% of survey respondents selecting him as having the best policies. Clinton came in second with 16% choosing her, followed by Trump with 13% and Cruz at 11%. When the question was altered slightly and those surveyed were asked which candidate would be best for the stock market Kasich still lead the pack with 35% of financial professionals choosing him, 22% felt Clinton would be best, and 14% believe Trump will do the best things for the stock market. In general the stock market is expected not to have as strong of a year as a result of the Presidential election regardless of which party or politician wins. According to Tracie McMillion, the head of Global Asset Allocation Strategy at Wells Fargo Investment Institute, the stock market historically does better during an election year with an incumbent running for re-election to the presidency. The market tends to be more volatile in an open election and more stable in years with an incumbent, which Tracie states is a result of the more predictable outcome in these elections. This volatility comes from having such a large number of candidates as potential outcomes, each of whom has policies and beliefs that will impact different sectors of the economy in different ways. Regardless of who wins the election everyone expects the stock market and economy to stabilize after it’s over.