Stock markets are there to issue, buy and sell stocks that trade on counter stock exchanges. An efficiently functional stock market is important in an economy because it helps the trading companies to quickly access available capital from the public. On the other hand, midterm elections refer to elections that are held in the middle of the term of a given number of executives; that’s after every two years of a seating. Such midterm elections are meant to take place on Tuesday November sixth this year and are expected to cause a significant change in the stock market.
Midterm elections have always been tremendous for stock markets ever since the II World War. Through the analysis of what happens in midterm elections ever since, it is evident that stocks do pretty well as the midterm elections nears and after the elections. This has been so no matter who wins the elections. Due to presidential ambitious nature for re-elections, they always tend to stir up and stimulate the economy which in return maximizes the stock market. This simply means that the elected president makes painful decisions in the first year in office so as to gain in the next polls; and this only happens around the midterm elections. Ever since 1946, every midterm election has raised the standard and Poor’s stock to about eighteen percent, with a midterm quarterly increase of 7.5 percent.
Early in 1972 election year, President Richard Nixon put pressure onto the Federal Reserve chairman to increase the amount of money supplied so as to secure his second term in office. In addition to this, he curbed inflation by imposition of wage charges as well as price controls on the stocks. This was to ensure his victory in the polls. This in return economically led to a rise in the stock market exchange. Stock markets often respond to expectations and changes in the economy. Therefore it is always a head of economical corporate earnings; which have grown over the years hence widening the expectations.
Binky Chadha who is the Chief strategist at Deutsche Bank asserts that three months to election and two months from elections has recorded a stock increase of about eight percent with only a four percent drop seen in 1978. This was an analysis for over twenty one midterm years. Chadha also says that this gain was as a result stock market goals such as growth and earnings. In this year’s midterm elections, control of growth and seasonality will lead to an increased stock market to about 2.5%.
We can’t ignore the policies implied on elections whereby there is a likelihood of the growth measures being affected. This is due to the fact that all along the presidential party has been so down during midterm elections. An effect to the taxes under tax reforms could have a significant change on individual tax cuts that might lead to new incentives for retirement savings as well as on research and planning. In the case of a loss by the presidential party, there is an expected confrontation from the democratic majorities. Government shutdowns and presidential administration investigations can easily unstabilize the markets thus affecting the economy as a whole. In conclusion, stock markets over the past twenty one years have increased after midterm elections. This has been as a result of hard work and efforts exerted by the elected leaders so as to have an upper hand in the polls.
