It’s no secret that the United States is currently in a politically tumultuous time. With countless perspectives and constant turmoil, politics affects it all. The stock market is no different. Due to the back and forth between politicians, stocks are everchanging. They rise and fall with new politicians in office forging new economic paths.
While you may have a political affiliation, it’s important to understand that stocks do too, sometimes. Knowing how to remain bipartisan in your investments is what will lead to more economic success for you.
Partisanship and Stocks
Though it’s often subtle, stocks can lean towards the left or the right. While this leaning isn’t necessarily a bad thing, it can have consequences for what you invest in. Politics are always changing. New people come into local and national offices frequently — with them, they bring new policies and trajectories. Most of all, a new president has the power to influence the entire country.
With these changes, stocks fluctuate. Some investors may withdraw from a fund with a new president while others increasing their holding. For instance, democrats tend to lean towards renewable, green energy sources while republicans tend to favor oil and gas. If former Vice President Joe Biden wins the upcoming election in November investors may see green technology stocks soar.
Any stock that has a political link, like various energy sources, will have short-term benefits when new presidents or elected officials come along that hold the same views. However, in the long run, the value of these stocks may drop or continue to fluctuate. These changes are not something you should rely on financially.
Stocks that Fluctuate with Politics
The stock market can be a volatile place. Politicians influence how certain investments perform, so it’s important to keep in mind which stocks will change over the years. Of course, no stock is likely to increase forever but knowing which will be the most successful and stable overall is key.
Green energy is likely to improve with a Biden win, while fossil fuels may see a revival if President Donald Trump wins his reelection. For instance, the oilfield company Schlumberger (NYSE: SLB) has seen drastic drops in market value this year. After the economic crash at the beginning of the coronavirus pandemic in April, oil, gas and petroleum values plummeted.
In another instance, semiconductor companies, like Advanced Micro Devices Inc., (NASDAQ: AMD) have had some of the highest fluctuations since 2019. In part, this volatility is due to Trump’s ongoing trade war with China, a leading producer of semiconductors. Further, a new bill may completely sever Chinese listings on the stock exchange.
Since healthcare has become a central political conversation, pharmaceutical stocks have seen some volatility, too. Mylan NV (NASDAQ: MYL) has been the most volatile this year, with price changes nearing 10%.
These companies are only a few examples of how politics influences the market. It’s important to keep an eye on what goes on politically to see how it will change what you invest in.
How to Be Bipartisan
To get the best return from your investments, being bipartisan will help. Choose the stocks that politics will have little to no effect on — like clothing companies or video game brands. However, always be sure to watch trade wars and taxes — these decisions will affect all stocks. Avoiding these political stocks altogether is one way to be bipartisan.
You can also choose to invest in stocks from both sides. That way, you have winning investments no matter who is in office. Be aware of impending crashes, though, with changing presidents or disasters like the COVID-19 pandemic. Energy resources are relevant examples — no matter who wins in November, you can invest in fossil fuels and sustainable energy.
The last bipartisan method is to invest in stocks that democrats and republicans agree on or support. For instance, a new bill regarding digital tokens has received bipartisan support to classify them as commodities instead of securities. Investing in these tokens could be a wise decision if the bill can calm crypto volatility.
An Equal Approach
Knowing how to approach stocks and politics is what will ultimately bring you the most success for your investments. Watch how politicians influence the economy, and how companies respond. Choosing the most stable stocks will lead to the best long-term investments, without fear of political interruption.
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