When Politics Influences the Stock Market

Politics ALWAYS influence the stock market. Higher taxes usually means lower returns for companies and a falling stock market. Low interest rates means cheaper capital for companies as well as lower return alternatives for investors which drives stocks up. Why put money in a 0.1% interest account when you can be investing in a stock that pays 3% in dividends every quarter? Below is an example if you’re doubtful:

3% Dividends four times a year

3% Dividends four times a year

Higher regulations on the coal industry during the Obama administration have virtually killed coal stocks such as ABX which fell from over $73 in 2008 to its current price of $1.93. I’m not here to state a value judgement, but a pure stock price judgement – so make sure you pay close attention to campaign promises of politicians. Here’s a video of Obama basically promising to bankrupt coal companies. Whether you like it or not, industries change and the President or other politicians can help spur this change.

From $73 to $1.93 in the past six years

From $73 to $1.93 in the past six years

Keep a close eye on what the media and politicians say about regulation on the soft drink or tobacco industry, as well as the budget set aside for defense and even our space agency NASA. Oil prices are largely affected by conflicts in the Middle East, and trade protectionism also is something to watch out for.

Posted in stock market and tagged , , , , , , , .

Leave a Reply

Your email address will not be published.