why do politics effect the stock market?

Answer 1

Investments are driven by belief that certain things will happen. If political issues shake that confidence or belief, people will adjust their investments accordingly.

Answer 2

Because the market is tied to the US dollar and the treasury department that controls the benchmark interest rates. If a political decision effects a sector of the market or could affect it in a positive or negative way the market will swing to the up or down to reflect investors concerns or strategy. In other words if the person in office in the US government says that they are looking at raising taxes on new vehicles to help pay for emmissions protection for the enviroment then the market will go down in fear that people will not be going out and buying new vehicles which will cut down on car manufactures profits and returns to investors. And that will trickle to other sectors too.
Now if the government said they are cutting taxes stocks would rise in anticipation that with people having the extra money that they would be spending more and pumping that back into consumer goods and boosting the economy.
Thats just one of many scenarios that cause the market to move in either direction.

Answer 3

Bill has the most-correct basic answer. Jason, though a little confused about interest rate - The Federal Reserve, which is not a government agency (such as Treasury), controls the so-called Prime interest rate, not other interest rates, which are Market controlled - has a decent explanation of the working of the system. Others here also have good insights. Factors other than politics have MUCH more impact on the stocks and bonds markets.

Answer 4

There are a lot of reasons. Depending on the politics, the following things can change:

Tax rates (this affects corporate profitability)
Interest rates (this affects corporate access to funds)
Wars (this affects where government funds get spent)
Social programs (this affects where government funds get spent)
Deficit (Excess borrowing by the government implies greater taxes in the future).

A recent academic study shows that the stock market does about 6%-9% better when a Democrat is president than when a Republican is president (yes -- the market does better under Democrats, not Republicans). My opinion is tha tthis is due to the fact that Republicans run up the deficit -- while Democrats pay as they go.

Answer 5

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Answer 6

Political Stability is the major factor for foreign investments. When there is no political stability, industries will suffer. So the investors will tend to withdraw their money from the stock market. Majorly all foreign investments will go out.

Even a decision of a government on tax and other issues may favor or unfavor an industry. If governments change frequently, the policy of the government on industries also changes. Their priority sector changes. So people tend to pull out all the money invested. Thats the reason ...

Answer 7

Everything effects the stock market.

Politics brings forth new policies and initiatives. Lets use Al Gore for example. If he decided to run on a "green" ticket, companies like Exxon-mobile, BP and other oil companies may suffer because their main product is gasoline and Al Gore wants to change the usage on Fossil fuels. stock on companies such as First Solar would gain steam because of their environmental friendliness.

It is often said that Hillary Clinton is good for business. Many investors feel the economy will strive under her. I am not to sure but that is a discussion for another day.

Tax incentives, interest rates along with their political platform will have a driect effect on business - therefore it will have a direct effect on Wall Street.

Answer 8

Affect

Answer 9

it is because politics influence people..

especially on the market system