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Political News - How Does it Affect the Stock Market?

Before President Bush had even finished congratulating the Democrats on their return to power, analysts were already speculating on the impact on business from this political news. Since both parties have their “pet projects”, a change in power should shift focus on industries such as: pharmaceuticals, financial services and energy. Changes in these industries can have an effect on their profitability; learning to evaluate the political news impact on these businesses is a crucial stock investing basic.

Pharmaceuticals
It is likely that political news will have a tremendous impact on the pharmaceutical business. A part of the Democratic agenda, because of the rising cost of medicine, has long been to use the clout and incredible buying power of the federal Medicare program to force lower prices for prescription drugs. If adopted by private health insurers, such a move would serve to actually cap drug prices. Such a move could affect the profitability of drug makers and successful traders would be wise to monitor changes in the mammoth industry.

Financial Services
The political news impact on the financial services business could also be quite noticeable. The key component in this area could be proposed changes in the Sarbanes-Oxley law, Capital Hill’s response to a plethora of corporate accounting scandals, requiring stricter financial controls and greater disclosure. Business has resisted such rules, alleging they are expensive, but Democrats, as a rule, have supported the idea of greater disclosure, especially in CEO pay, which could have a ripple effect on the bottom line corporations. As the wise investors follow these events, they will invest more time in stock technical analysis of the affected companies.

Another change in the financial services business that could feel the impact of the political news are Fannie Mae and Freddie Mac, the two congressionally chartered companies that possess approximately 40 percent of the $10 trillion home mortgage market. Republicans had sponsored controls on these companies that the Democrats oppose. It is likely that these efforts will be reversed once the Democrats are in power.

Energy
It is quite possible that the energy sector will be affected the most by the political news impact on business. One of the crowning achievements of the Bush administration was the Energy Policy Act of 2005, which included a number of perks from for the oil, gas and coal companies, including tax breaks that the Democrats opposed. Democrats have already proposed hearings on oil industry profits; some have favored a “windfall” profits tax. Such moves could have immediate effects on oil futures.

In essence, the political news impact on business can already be seen, with the frantic analysis and stock market advice. For the investor already monitoring the upcoming events relating to business and the upcoming political news impact, it is necessary to continue following a strong stock trading plan, including a stock market trading system such as Japanese Candlesticks. As seen in other examples, uncertainty can create nervous trading in the markets, but it can also create great opportunities for profit. Having a stock investing system that aids in predicting the trends and drawing successful conclusions on the direction of the market is sure to create successful trading as business feels the impact of political news.

 

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