The Forex Market & POTUS: What Can History Teach Us?
As the 2020 US Presidential Election countdown clock ticks down to just 50 days, we thought we’d take a little look back at the history books to see how the forex market has fared under previous presidents. Are there lessons to be learned for Trump vs. Biden? Read on to find out and you’ll also get the regular lineup of market events to watch out for as a bonus. Lucky you!
He’s just one man
This particular lesson goes all the way back to 1787, to the very beginnings of the USA. The Founding Fathers, so intent on avoiding corruption , divided power between three separate but equal branches, the legislature, the judiciary and the executive.
President Trump was starkly reminded of this when he first came to office in 2016. Running the US government isn’t quite the same as controlling a commercial empire from floor 1005 of Trump Tower.
Because of this, there’s rarely a direct correlation between the actions of a president and Forex market performance. But, as 1 of the 3 super-powerful cogs of the US government (and its public face), he, of course, has influence.
A clear party correlation?
We’ve dusted off the history books at Contentworks HQ and uncovered quite an interesting thing. Perhaps more potent than the actions or character of the man in the Oval Office, is the party that puts him there.
Since the late 1980s, we can see a clear pattern showing the US Dollar gaining under Democratic presidents and suffering overall losses under Republicans. Check the chart below. ⬇
We can see that Clinton and Obama both held office during periods of progression for the Dollar. Clinton, in particular, left 1600 Pennsylvania Ave. with the Buck in a very strong position, relatively speaking. Later, Obama seemingly reversed the declining fortunes of the USD under Bush Jr.’s presidency.
USD Index Performance by President
Source: TradingView
Victims of circumstance?
The chart above comes with very little context. As the world’s only superpower, the US has an immense responsibility, economically, diplomatically, militarily, socially (and pretty much every other word we can think of that ends in “ly”).
The fact that we’ve singled out party politics here arguably has very little to do with anything.
These presidents all had things to deal with. Some more than others. Take President Bush Jr, for example, who presided over the worst terror attacks ever to take place on US soil; the subsequent “War on Terror”; Hurricane Katrina; and the 2008 Financial Crisis. All of which (bar Katrina), were major global events that placed a huge strain on the US economy.
Arguably, neither Clinton nor Obama had such huge crises to deal with, despite the latter inheriting the “War on Terror”. Most of the issues and successes they faced were domestic-based.
Up until this year, Trump looked like he may be able to buck this trend until COVID hit and the US economy stalled.
What can we learn?
There are a few lessons to take away from this.
- Presidents are just one part of the government and, constitutionally, can’t have too much impact on a personal level.
- The individuals and parties can only play the cards they’re dealt with — crises, wars, global issues, each plays a part in the strength of the USD.
- This is just a tiny snapshot of US history, don’t base any investing decisions on it!
What about 2020?
The polls are hardly neck-and-neck. With the finish line in sight, Biden is a long way ahead in terms of winning the backing of key states. But, we’ve seen this before! Pollsters got it very wrong 4 years ago.
Whoever wins the election, Rep. or Dem, will face a crisis right off the bat as covid-19 continues to dominate news.
How will the USD look this time in 4 years? We’ll have to wait and see…
Who do you think will win the 2020 Presidency?
How’s this all going to pan out? And what impact do you think the winner will have? Tweet us at @_contentworks
What’s up in the markets this week?
A quiet start to the trading week will be followed by a flurry of activity later on. Here’s what’s on the agenda.
Monday
No major events scheduled.
Tuesday
● We’ll get an update on the UK’s Employment Figures (GBP)
Wednesday
● The UK will announce its August Inflation Rate figures (YoY) (GBP)
● The US will give us a glimpse at its monthly Retail Sales numbers (USD)
● And the Fed will also announce its own Interest Rate Decision (USD)
Thursday
● Down Under, we’ll get an update on Employment Figures (AUD)
● The BoJ will announce Japan’s Inflation Rate Decision (JPY)
● Ahead of the BoE announcing the UK’s own Inflation Rate Decision (GBP)
Friday
● Closing the week, Japan is set to reveal its August Inflation Rate (YoY) (JPY)
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Speak soon!
The Contentworks team
