Gulf Brokers: markets to be less predictable if Biden wins
AETOSWire):( Financial markets are volatile ahead of the
biggest political event of the year, the US presidential
election on November 3, which are held every four years
and always on the first Tuesday in November.
The stock markets usually widely fluctuate as soon as the
election results are published. The main question here in
case Democrat leader Joe Biden elected is how the financial
markets will react. The market participants believe that it
will be negative for the stock market mainly because Biden
has said he will roll back Trump’s corporate tax cuts, which
would hit corporate profit margins. The Dow Jones
Industrial Average has generated 83% average return
during Democratic administrations compared with 45% for
the Republicans.
The S&P500 index recovered from 2020 March low, surged
more than 40% after the Federal Reserve pumped liquidity
into the market. According to a 2019-Dimensional Funds
report, the market has been positive in 19 of the last 23
election years spanning 1928-2016. The S&P has traded
positive in each six-month period before a presidential
election except 2008. Since 1929, the total return of the
S&P500 has averaged 57.4% under Democratic presidential
administrations, versus just 16.6% under Republicans.
Will gold continue to rise?
On starting of this month, the gold price hit an all-time high
of $2075. The safe-haven metal surged more than 35% this
year. The Investors have been buying up gold this whole
year as first rising coronavirus cases, escalating tensions
between the US and China and then lower interest rates,
and now the US election have heightened uncertainty
among investors.
If you look at the technical chart, the last election period
shows that the trends of gold prices soaring in the months
of July to October before the election and then they
witnessed significant drop after the event. On average, gold
prices continue to decrease until January of the following year.
As the 2020 election comes close, GulfBrokers expects the
coming weeks in the US presidential election will be volatile
for the financial markets due to high levels of uncertainty.
The single best way of protecting investors from downside
that an election offers is to ensure they have a truly
diversified portfolio.