Politics and Its Influence on Stock Market Activity

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What Connections Can Be Discerned Between Politics And The Stock Market Activity?

Recent market volatility has been reported by financial analysts to be generated in large part by the faltering Chinese economy. Morningstar.com presented both sides of this story in discussing not only the causes but also the long-term prospects and actions that have already been taken by the Chinese government to prevent further devaluation of their currency. Such cause/reaction scenarios are often encountered in global financial markets to control both growth and decline. Who makes such decisions that control the monetary flow in the Chinese economy? Look to those in the government for the answers. News of actions taken to counteract economic slides or currency impacts will certainly lead back to the political leaders.

US regulators for example are considering increasing interest rates as that economy improves its position for unemployment concerns and stimulated markets in general. Are these decision-makers private-sector financial analysts with their fingers on the pulse of business? Not at all. While business leaders provide some level of influence in decisions that will impact the country’s economy the final decision rests with those entrusted through appointments made by political leaders.

Stock markets around the world are influenced significantly by political actions, and will continue to be in the future. Entire economies are judged and measured by several key factors:

  • Stock Market Activity
  • Inflation
  • Exchange Rate
  • Politics
  • Interest Rates
  • GDP

Politics is but one of these elements yet is a considerable concern in many global markets. The political climate of a country whether stable or in a state of flux can have a clear and significant impact on the other economic factors. This makes politics a critical consideration for investment in global markets where political unrest, transition, or instability is present.

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