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Market implications of the 2016 election

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World Pipelines,

Tomorrow’s election is among the most hotly contested in recent history. This report analyses some of the potential investment implications of the election, while maintaining a neutral tone with respect to any political party. The analysis is based largely on the stated positions of each major party's Presidential candidate, Hillary Clinton or Donald Trump, and the research of unrelated parties.


First, the market tends to favour a ‘split decision’ with respect to which political party controls the White House, Senate and House of Representatives. Under this split decision or ‘gridlock’ scenario, it will be challenging for either party to enact major legislative changes, allowing free market forces, not central planning, to drive the economy's future.


Most projections suggest the Republicans will retain the majority of positions in the House of Representatives, while the Democrats are likely to gain control of the Senate. If these projections hold true, regardless of which Presidential candidate wins the White House, one party will not sweep all three elections, resulting in Wall Street's desired split decision.


The Presidential candidates have sharply different policies in the Energy and Healthcare sectors. Candidate Clinton favors further progress in the direction of a ‘green’ future for America's energy needs. Solar, renewable energy and natural gas firms may be prime beneficiaries under her energy plan.

In contrast, candidate Trump has strongly supported ‘clean coal’ technology as well as conventional oil and gas energy sources. He supports the Keystone Pipeline, which plans to run from Canada through the United States, so long as the deal is "favourable" for America. In contrast, candidate Clinton has announced her opposition to the Keystone Pipeline.

Political elections are one of the greatest change agents of the American economic system. The contrast between the two Presidential candidates, Hillary Clinton and Donald Trump, is the starkest in recent memory. There appears to be less drama in the Congressional elections, with most forecasters predicting a split decision, with Republicans maintaining control of the House and the Democrats gaining control of the Senate. This type of result is generally cheered by Wall Street, which likes gridlock so the free market system can drive the economy.

But make no mistake, there will be clear winners and losers, beyond the candidates running for office. To some extent, the market has already priced in some of the anticipated movement. However, the election is too close to call and there is a high likelihood of a sharp move in the market, regardless of who wins, as some uncertainty is resolved and cash either pours into the market, or flees it.

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