One Year on: Have Politics Changed the Markets?

A lot can happen in a year, and 2016/2017 has been no exception, with numerous significant political events impacting global markets and creating apprehension amongst investors. After so many shocks in different countries, the global markets have certainly been changing. Here are some of the recent political events which have changed the markets.

Brexit

The much anticipated June 2016 referendum in Britain saw the British public vote by a narrow margin to leave the EU after 43 years as a member. This sent the pound into freefall against the euro (it has since recovered), a fluctuation which forex traders relish.

The largest impact on the markets, however, has been the uncertainty which followed. Investors are cautious with regards to investments, as Britain will probably leave the single market. This will adversely affect British business and markets as a result. There has, therefore, been much speculation and anticipation amongst market traders.

Donald Trump  

The election of Donald Trump was another major upset in global politics, as well as a significant impactor on global markets. Those trading with brokers like Oanda may have noticed the significant spike in US 2Y yield, as markets reacted to the investment promises of Trump.

His wildcard politics and policies, however, have shown him to be rather unpredictable, and caused huge divisions in the US. Therefore, it remains to be see whether his pro-growth policies will be implemented, and it is now very much a waiting game for market investors.

The French Election

The French election was similar to the Brexit referendum in that its result was to decide a country’s future relations with the EU. With the pro-EU Emmanuel Macron comfortably beating the anti-EU Marine Le Pen, markets reacted accordingly, with the euro rising against the dollar and ensuring a certain degree of future stability.

The stock markets also surged after Macron’s win, with France’s Cac index rising more than 4%. This result represented a new confidence in the EU and thus reduced market volatility which had preceded it.

The global markets have been subject to major political events over the last year, all of which have had implications on currency and markets. The most significant of these changes happened in the immediate aftermath of these events, but it is worth noting that most markets are volatile by nature, and have constantly been shifting throughout history. Therefore, political events have certainly influenced investor behaviour and confidence in the last year, but only time will decide the permanency of this.