How do political factors influence the stock market?

Political decision changes or disruptions may have a meaningful impact on the performance of a company, eventually impacting its stock prices. Also, there are multiple political factors affecting stock markets. For instance, the stock price goes down in case of risk of war, weak government, political turmoil in the country, etc. In addition, budget announcements or elections significantly impact the volatility of the market, affecting stock prices.

Generally speaking, political factors that impact the stock market can come from a number of sources, including:

  • Policy decisions and shifts affect things like trade tariffs, taxes, labor conditions, privatization, and regulation.
  • Political leadership changes and government instability.
  • Political volatility and uncertainty stem from terrorism, riots, coups, or war.
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