Political events and U.S. market movements

Political eventsPolitical events can heavily influence market movements and in some cases, drive substantial volatility. By following the news on the Vestle platform, you can keep abreast of political information that might alter the markets.  Political events can influence the currency markets as well as commodity and equity markets.

U.S. Politics is Driving Price Action

U.S. politics changed completely when Donald Trump was elected in November of 2016. The U.S. stock market roared. But since January of 2016, it has been unchanged.  A major election will take place in the U.S. in November 2018, which could have a profound effect on the future direction of the equity markets.  While the November election is not a presidential election, it is a mandate on Trump and could decide who runs the House of Representatives and the Senate.  Currently, the republicans run both the house and the senate. But this could change in November which would generate significant volatility.

Trump’s tariffs have also been an issue. He has placed 200-billion worth of tariffs on China and is threatening to add 500-million more in tariffs.  This has caused a strain in the market and created undue volatility. In fact, President Trump believes that if he changed what he believes to be unfair trade practices at an earlier stage, the U.S. markets would be up more than double the 40% climb that it has experienced since he came into office in 2016.

Recent Geopolitics Affects Oil Markets

In May, President Trump announced that he planned to pull out of the Iranian Nuclear deal.  This would put sanctions back on Iran and would reduce the number of oil barrels they would be able to sell around the globe.  This was a surprise and pushed Brent crude oil prices up to $80 per barrel.  While most U.S. allies were unhappy with Trumps decision, he officially pulled out but then made some concessions which allowed crude oil prices to drop.  Trump wants sanctions but also lower oil prices which does not seem to be happening. Since he decided to pull out unilaterally, he does not have the support of other OPEC members which has allowed crude oil prices to continue to remain buoyed.

Trade War is Also Affecting the Currency Markets

The tariff issues have spilled over into the currency markets. The PBoC set a weaker fixing for the Yuan for a seventh consecutive day on July 20, which was the most for a single day since June 2016. USD/CNY’s fixing rate was increased to 6.7671, up from yesterday’s 6.7066 and the highest in a year. The offshore Yuan consequently tumbled by over 0.5% to a 6.8358 low versus the Dollar, a level not seen since late July last year. The weaker setting of the reference rate comes hot off the heels of President Trump’s latest venting about China’s currency valuation. This deepened concerns about the evolving China-U.S. trade war. Political events can alter many markets and have also been a headwind for Chinese equities.  If you are planning to be an avid investor, it helps to be abreast of current political events.

 

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