US presidential elections can influence stock prices, with certain sectors often expected to rise.

The US presidential election is held every 4 years, and stock prices often show characteristic movements around that year. This is known as the “presidential election anomaly,” and it's a remarkable phenomenon for investors. This trend was particularly evident during President Donald Trump's tenure and election period, and a transaction strategy called “Trump trade” attracted attention. Trump's policies and statements have had a huge impact on the market and have become a very important factor for investors.

In this article, I will look back on stock price trends in past US presidential elections and explain in detail the impact that the policies of the Trump administration and the Democratic Party administration had on the stock market. We'll also explore sectors we should focus on in the future. If you are interested, be sure to read to the end.

What is a “presidential election anomaly”

Presidential election anomalies indicate a phenomenon where certain patterns and fluctuations occur in stock prices due to the 4-year cycle of the US presidential election. This trend is repeatedly observed in the market during and around election years. The background of the anomaly is thought to be the impact of the different economic policies of the Democratic Party and the Republican Party on the market. Specifically, the Democratic Party places importance on economic stimulus measures and strengthening regulations, and the Republican Party promotes tax cuts and deregulation. In this way, each administration forms a different economic cycle, which manifests itself as an effect on the market.

Market timeline associated with the presidential election: stock price trends from the previous year to after the election

- In the year before the presidential election, it is common to see governments and businesses launch aggressive economic stimulus measures to revitalize the economy. This includes tax cuts and increases in public investment, which have a positive impact on the market and tend to increase stock prices.

- As we enter the election year, stock prices will still maintain an upward trend, but market volatility will increase due to uncertainty about election results. For this reason, it is common for investors to take a cautious stance. During this period, while companies place importance on stable performance, industries related to election promises may attract investors' attention.

-Once the November vote is over and the election results are confirmed, the policy direction of the new administration becomes clear, and stock prices often rise again. The market has recovered confidence against the backdrop of expectations for new policies, and further stock price increases are expected, especially in areas where infrastructure investment and deregulation are progressing.

-During the presidential term, especially the 3rd year, the average return rate is as high as 13-15%, and stock prices tend to rise. The reason behind this is that presidents often promote specific measures to promote economic growth in anticipation of re-election.

Relationship between US political and economic cycles and stock prices

In America, the different economic policies of the Democratic Party and the Republican Party form the political and economic cycle and have a specific impact on stock prices.

• Democratic Party Policies and Stock Prices: The Democratic Party, which emphasizes economic stimulus measures and strengthened regulations, prioritizes social welfare and environmental protection. This policy has made it easier for the technology and healthcare sectors to grow, and the average annual price-earnings ratio under the Democratic Party president is around 13%.

• Republican policies and stock prices: The Republican Party, which emphasizes tax cuts and deregulation, will develop business-friendly policies. As a result, energy, finance, and manufacturing are likely to benefit, and the average annual rate of return under the Republican presidency is around 7%.

In presidential election years, stock prices tend to rise no matter which party wins. The average return on stock prices for presidential election years after former President Clinton is around 9 to 10%.

Sectors to watch after the US presidential election

The impact of the Trump administration's policies on the stock market and notable sectors

$Trump Related Stocks (BK22962) $Looking back on the past, the Trump administration's policies, particularly tax cuts, deregulation, trade wars, and strong dollar policies, had a major impact on the stock market. The reduction in corporate tax increased corporate profits and promoted a rise in stock prices. Energy stocks and financial stocks also benefited from the Trump administration and achieved sustained growth.

Effects of corporate tax cuts and deregulation

• Corporate tax cuts: The Trump administration cut the corporate tax rate from 35% to 21%, increasing corporate profits. Furthermore, plans to reduce the tax rate to 15% have also been reported, which could further boost corporate profits.

• Deregulation and dollar policy: Deregulation has revitalized corporate economic activity and strengthened the dollar.

Notable sectors

Technology companies: Tax cuts and deregulation are boosting tech companies' growth. Despite short-term instability due to trade wars, long-term growth is expected. Also, the Trump administration is seen to be relatively tolerant of cryptocurrencies.

Energy-related stocks: The Trump administration's energy policy gave preferential treatment to the oil and gas industry. Relaxation of environmental regulations and promotion of pipeline construction have benefited these companies.

Financial stocks: Relaxation of financial regulations and expectations of rising interest rates have had a positive impact on the financial sector. However, we need to be careful about changes in the Federal Reserve's monetary policy.

Sectors to watch after the Democratic Party wins

According to the survey, in data for the entire presidential term since 1972, business cycle stocks tend to perform better after the Democratic presidential candidate wins. Business cycle stocks refer to stocks whose performance fluctuates according to economic trends, such as information technology and the industrial sector. In particular, under the Democratic Party government, these sectors have significantly surpassed the Dow Jones Industrial Average. Both candidates for Mr. Harris and Mr. Trump are focusing on drug price control this year, so regardless of the election results, the healthcare industry is expected to be in a difficult situation. Therefore, when the Democratic Party government is born, investors should pay attention to business cycle stocks while also paying attention to trends in the healthcare sector.

In which sectors are stock prices expected to rise in the US presidential election?>

summary

When considering investment strategies in the Trump era, it is essential to quickly grasp his policies and statements and quickly make investment decisions based on them. We know that Mr. Trump's tweets and speeches often have an immediate impact on the market and create short-term trade opportunities. Tax cuts and deregulation in particular have greatly benefited the energy and financial sectors. Therefore, investors are required to quickly catch up on this information and respond flexibly to market changes.

It's also important to understand how index and exchange rate movements affect portfolios and manage risk appropriately. This includes incorporating new stocks into portfolios as needed and closely monitoring trends in business cycle stocks under the Democratic Party administration. It is possible to maximize long-term returns by strategically adjusting portfolios while keeping an eye on market trends after elections. Through such a process, investors will be able to build more effective investment strategies.

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