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How Elections Influence Market Trends and Business Strategy

By: Andrew Deen

 

Man putting his vote do ballot box. Political elections in Poland

In the world of business and economics, there are many factors that can alter markets and change the market atmosphere for business owners. One specific event that always seems to have some sort of effect on markets is political elections.

From presidents to senators, political elections can have meaningful impacts on the economy that may change the way business owners and operators approach their entrepreneurial pursuits. Anyone who owns a business or intends to start one can benefit from an understanding of how elections impact markets and the best ways to respond to these changes.

Here’s how elections influence market trends and business strategies.

Why Elections Have an Impact on the Market

In truth, there isn’t just one overarching reason why elections have an impact on the economy. Instead, there are a wide variety of factors that impact markets and change the landscape for civilians and business owners alike.

Some key reasons elections impact the market include:

Changes in economic policy: If a new politician with specific views is elected into office, they may use their newfound power to change economic policies or enact new ones. These can affect various parts of the economy ranging from international trade to small business, meaning that business operators will have to contend with innovations in the market.

Volatility or change in stock markets: While stock prices are meant to be representative of a business’s actual worth, the truth is that public attitudes and speculation can have a significant impact on stock prices. When a new politician is elected with specific views that may affect certain industries, the stock market may fluctuate in substantial ways. This fluctuation, in turn, will have a domino effect that affects the economy as a whole.

New politicians may bring uncertainty: It’s been shown that on average, the stock market experiences more growth when the same president is elected for a second term as opposed to when a new president is elected. In essence, this highlights the fact that political uncertainty can have a notable impact on the economy and the way that market’s function.

Ultimately, everything from electoral integrity to presidential attitudes can impact the economy. As such, it’s clear that business owners and operators must be prepared to deal with change during big and meaningful political elections.

Fortunately, the changes that come with elections don’t necessarily spell disaster for all American businesses. Though elections may bring challenges, there are ways that business owners and entrepreneurs can navigate these shifts and find success despite election-related obstacles.

How Business Owners Should Change Their Strategies in Response to Elections

Businesses of all sizes can be impacted by political elections. Fortunately, all businesses also have opportunities to change their approaches to safeguard themselves from negative impacts on their businesses. Anyone involved with a business can benefit from understanding what these practices are and why they can be so impactful.

Here’s how business owners should change their strategies in response to elections.

Diversify

Whether one is a stock trader or a small business owner, diversification can be a meaningful and effective strategy for success during elections. The reason for this is that diversification gives you more chances to dodge negative economic changes and thrive in response to political elections.

In essence, having all of one’s economic eggs in one basket leaves one completely vulnerable to changes. For example, if one has an import business that relies on the imports of one specific country, a change in tariffs or policy could completely ruin one’s business.

Conversely, having different means of generating income, such as also selling the goods of local artisans, could give one some armor against economic changes. This being the case, it’s clear that diversifying is a great way for business owners and operators to prepare for and respond to political elections.

Gain Clarity Around Risks 

As has been noted, elections can bring a significant amount of uncertainty to the market. This can cause all types of changes in the economy that can negatively impact one’s business and specific market.

In response to this threat, it’s key that business owners and operators take time to assess potential risks and gain clarity about what their businesses need to do in order to avoid them. In some cases, this may require the help of outside consultants who specialize in risk management and business strategy.

Ultimately, being proactive about responding to changes and taking the right steps could empower business owners to thrive despite the economic changes that come as a result of elections.

Business Owners Must Prepare for Political Elections

Though some business owners may be under the false impression that their business is impervious to political change, the truth is that elections have the potential to impact businesses of all types. Thankfully, understanding the risks that elections bring and taking steps to safeguard one’s business can greatly benefit one’s economic activities.

Published: May 13, 2024
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Andrew Deen

Andrew Deen has been a consultant for startups in almost every industry from retail to medical devices and everything in between. He implements lean methodology and is currently writing a book about scaling up business. Twitter @AndrewDeen14.

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