Effect of political news on trading markets
Investing and trading markets are affected by many micro and macro factors, such as interest rates, inflation, economic outlook, changes in policies, wars, and also by political news for sure. Politicians and the news about their decisions would directly or indirectly affect different businesses which are followed by movements in stocks and different asset prices. The historical political events and news have always influenced the world’s financial and trading markets.
There are many extreme cases that political decisions lead to major swings in stock and commodity trading prices globally. For example decisions on war, important information leaks, bribery or other scams and many other similar political events have caused considerable market price movements during history.
Specifically talking about stock markets it is assumed that the more stable the political situation in a particular country is, the more favorable situation would be for the stock market investors and traders.
Generally, the impact of political news is maximized in weaker economics. Political uncertainty makes trading and investing risky and the risk is magnitude in weaker economic conditions. When the economy is weak stocks are more volatile and correlated.
Effect of negative and positive political news
In all markets, whether stocks, commodities or sometimes cryptocurrencies trading markets negative political news will normally cause people to sell their assets. In cases of the bad earnings report, a lapse in corporate governance, and political uncertainty, selling pressure and a decrease in the prices of most stocks and commodities is observed according to reports and historical analysis on how political news may affect market prices. On the other hand, it is assumed that positive political news will cause traders and investors to enter buy positions in different markets. In cases of good earnings reports, an announcement of a new product, a corporate acquisition, and positive and stable political condition buying pressure would increase and prices would experience an uptrend. It is notable that bad news for some stocks or commodities may be good news for others. So it is important to go through a comprehensive analysis and learn how political news can be a threat or opportunity for traded assets.
Don’t follow political news, anticipate them!
Successful traders and investors try to anticipate political news and analyze their effects on markets trend rather than just following the news. They spend considerable time trying to anticipate the next political news cycle. Predicting the news would offer opportunities for buying or selling assets before the real prices are released. However, it is not that easy since there are many political events that simply cannot be anticipated. For example, it is hardly possible to anticipate a massive auto safety recall or a Mideast crisis that drives up oil prices. Even it a trader or investor be able to anticipate the political news, the possibilities of things going wrong are still limitless. Over the history expected or unexpected political news drives prices in one direction or the other.
Effect of political news is short-lived
Many experts and analyzers in the trading market believe that the impact of politics and political news on price trends is often short-lived. This assumption is generally correct so political news can be a great chance for creating attractive entry points for those investors who take it into account. However, in case you failed to anticipate the news and failed to adapt your decisions to it don not panic. You should not overestimate the effect of political events like election results and similar events since markets usually return to normal pretty quickly most of the time. It is true that surprising political news affect market prices are short-live but it is undeniable that the political environment definitely influences what happens in the trading market of stocks or other assets.
Effect of political news on the commodities market
The oil market is considerably affected by political news of the main oil suppliers and key drivers of the oil price. Oil prices similar to other commodities are driven by supply and demand factors while political news can directly make a change in global supply and demand base on recent researches. There are some types of political news or announcements that any oil trader or investor must follow to predict the market prices.
Middle East turmoil is considered to be one of the most important factors that influence the oil market. No trader or investor in the oil market can ignore the importance of the middle east for global supplies. The Middle East includes some of the world’s biggest producers and suppliers of oil. So any political news or disruption related to the Middle East would influence the oil market prices. The political stability of oil-producing countries is crucial to maintaining the oil global supply. Traders must try to understand the region’s political conditions in order to determine potential threats or opportunities.
On the other hand, OPEC announcements and news are crucial to follow for oil traders. OPEC refers to an organization of 14 main oil-producing countries including Saudi Arabia, Iran, UAE, Iraq, Kuwait, Venezuela, Qatar, Libya, Algeria, Nigeria, Ecuador, Gabon, Equatorial Guinea, and Angola. An oil trader must always consider and follow developments or news coming from OPEC or any constituent countries.
Considering the fact that the oil market is one of the main global markets, oil price changes cause changes in other commodities or even currency markets. Although factors influencing oil prices are outside the financial markets, and the prices as mentioned earlier depend on current political issues in the producing countries and on-demand from large consumers, but movements in oil prices have a profound effect on financial markets. Many companies and currencies are hit by rising oil prices.
Political uncertainty along with expected or unexpected news can affect the success of any trading intention drastically. So for any trader or investor in the different trading market is crucial to analyze, follow and anticipate political news in order to make more accurate decisions and determine entry and exit points of markets to maximize the profits out of investments and trades.