According to a CNBC article, a poll from the National Federation of Independent Business saw its uncertainty index hit a 42-year high with this election cycle. Political uncertainty caused by the election continues to be a cited as a key reason small-business owners are hesitant to expand their business. Though this is not a unique occurrence, with the same trend occurring in 2012, this election has proven to be especially stalling.
Small-business owners who don’t have the resources to anticipate changes in government policies or economic conditions that come with the election are currently unwilling to deploy capital, hire, borrow, or make any long-term financial decisions according to Juanita Duggan, the NFIB’s president and CEO in a CNBC article.
The election clearly affects the economy in more ways than one. Many companies you night not initially think of have reported drops in revenue. From cruises to donuts CEOs across the country have released statements on how the election has affected their company. Dunkin Donuts, KFC, Tempur Sealy, Red Robin, Whirlpool, and Twitter among others have all felt the shift.
“I think there’s just great uncertainty as to what’s going to happen in the U.S., in particular, as a result of the outcome of the election,” Yum Brands CEO Greg Creed stated in an article from Forbes.” It goes without saying that people are sort of trying to decide who to choose and what the impact will be on the economy. And I think people may be just hunkering down a little bit.”
Though not everyone has been negatively impacted, Google has actually reported increased traffic during the heat of the election cycle. Thanks to their partnership with news organizations to live stream the presidential debates, and the vast array of election content they offer the company has seen increased profits. Their debate live streams on YouTube resulted in over 8.5 million hours watched live, an astounding 5x increase from the 2012 debates according to a CNBC article.
Various industries are set to either benefit or be hindered depending on which candidate is elected. Industries such as banking, insurance, and pharmaceuticals are slated to do better should a Republican win the election according to an RT.com article. With a Trump presidency, almost all of the healthcare industry can expect to benefit as well according to a report by investment management company BlackRock.
With a democratic win finance and drug companies would likely have the most to lose according to Bloomberg. “Tougher rules, as well as tax changes, might have a negative impact on Wall Street banks Goldman Sachs and JPMorgan, according to a report by Morgan Stanley Research,” the article states.
The article also noted any major upside created by a Clinton win would be limited due to the fact that the market has already priced her victory, whereas a Trump victory may trigger a massive selloff Margaret Yang, a CMC Markets analyst, told RT.com.
The Stock Market
The stock market has been used in the past as an indicator of how people are responding to political happenings, the election being no exception. Though of course there is no guarantee the trend will continue, in a Business Insider article Sam Stovall, chief investment strategist at CFRA, is quoted as saying, "Going back to World War II, the S&P 500 performance between July 31 and October 31 has accurately predicted a challenger victory 86% of the time when the stock market performance has been negative." The article also states that when stocks are trending upwards the incumbent party tends to win the White House and when they are trending down the opposite party is usually slated for a takeover.
The Economy as a Whole
Though things will level out once the results are in, there may still be some ripple effects. “What we’ve seen is when the newspapers are talking a lot about uncertainty, you see the stock markets are much more volatile,” said Nicholas Bloom, an economics professor at Stanford University, in a MarketPlace Article. “Stock prices are jumping up and down on a daily basis, investors definitely take notice and they get nervous. And we also tend to see investment drops and employment drops. Businesses are cautious… So there’s also a real cost to the economy of increased uncertainty.”
As a business student or future business student the election might play a bigger role in your field than you realized. Regardless of the outcome tonight the country, its economy, and our UW College of Business students are set to see change.
Comment below and let us know what changes in the business world you want to see as a COB student!