- ETX Capital have carried out research looking at how the markets reacted to US elections, as well as how global events have affected the volatility index and the value of gold.
- In the 2008 recession, gold increased in value significantly by 21%, but fell 16% after Obama’s 1st election.
- 2016 saw a huge drop in the value of gold, with Trump’s election. This election saw the biggest drop in the price of gold, falling 11%.
As changes in markets regularly occur through everyday events, it raises the question, how do ‘global’ events impact them? ETX Capital studied the market, to see how it has differed throughout the years.
The in-depth study focuses on the fluctuation of the Dow Jones, the price of Gold and the Volatility Index. The volatility index helps to determine when there is too much optimism or fear in the market. When sentiment reaches one extreme or the other, the market typically reverses course.
Erratic Elections
The study looks at how volatile the markets become in the immediate aftermath of elections, looking at both the Dow Jones and the Volatility Index (VIX). Some of the key findings were as follows:
- In 1996, the presidential election between Clinton and Dole saw the Dow Jones increase 26% following Clint
- 2008 bore witness to the recession, as Obama and McCain went head to head. The Dow Jones dropped 34% over the course of the election, in a hugely tumultuous period of financial history
- 2016’s election saw the battle of Trump and Clinton. The Dow Jones increased 13% following Trump’s election to office. Looking ahead to 2020, averages from previous years suggest that the Dow Jones will sit at an increase of around 3%.
Global Events
The 21st century has seen some remarkable global events, making a huge impact on the world both politically and economically. But how much sway do certain events have on the markets?
- In 2015, the Swiss Franc crash happened in tandem with an increase in gold value of 9.5%.
- Trump’s 2016 October election saw the value of gold dramatically drop 11.9%, with the volatility rating down to 15.1.
- Following from Trump’s election, Theresa May’s election increased the value of gold 2.1%, but saw a decrease in the volatility index.
To view the full research as well as infographic, click here.
The Volatility Index (VIX) helps to determine when there is too much optimism or fear in the market. When sentiment reaches one extreme or the other, the market typically reverses course.