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Contributors Financial Markets are sometimes…Political

There are times in the financial markets where they become “political”. What do I mean by that? I mean that politics can be a dominate force more at certain times than others. 

Not surprisingly, politics becomes a dominate force in the financial markets when “election time” gets close. Why? Well, amazingly, politicians get off their duff and start doing things to actually try to improve the economy and the markets. 

Things they weren’t for before…suddenly, they’re for (when it comes election time). Also, things they drug their feet on earlier on in their administration, they begin to push through once it comes closer to re-election time. 

Savvy investors know this and play off of this dynamic. Have you noticed that the financial markets have picked up steam since last October? Why? It’s because there is an election coming and no president wants a stock market to dive on them around election time. That way, they stand a better chance of being re-elected. Although personally, of course, I hope Obama doesn’t get re-elected. 

But one thing is for certain…financial markets tend to be in more of a bullish mode leading up to an election because they know that the president and central bank, etc. are more apt to help improve sentiment and step in and do something in the markets if needed strictly due to the election time coming up. 

Many politicians are selfish at the core…so they mainly are concerned about “getting in office”…and then not too concerned until it’s re-election time and then they worry about “staying in office”. 

So you have to play to that selfish mode of theirs and know that if the markets are ever going to be favorable…many times it will be the times leading up to an election. That’s why stocks have improved since last October…and other “risk on” assets have done quite well. 

Going into 2012, when many of the trends officially changed…we jumped on the “risk-on” train as the political influence was starting to aid the markets.

In my Currency Cross Trader service, we racked up over 300 pips buy buying NZD/USD. We made over 200 pips by  buying CAD/JPY next and then we locked in over 140 pips so far by buying GBP/USD and closing half of our lots. We still may reap more out of that trade, yet our stop is just above breakeven…so now we practically have a riskless trade on. 

Even recently, we just launched another trade which will take advantage of the improved mood of the markets which has been influenced by the political realm lately. 

So it’s good to know the dominate forces that are at work influencing the markets at any given time. Right now, at least one of the major influences out there is “politics” due to election time coming soon. 

Sean Hyman
My E-Book
Editor, Currency Cross Trader

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