How do politics affect the stock market?

Government regulations and laws have an impact on businesses and their actual performance. For example, Presidents select economic advisors and fill roles such as the chair of the Federal Reserve, which influences company performance.

The overall effect, however, is a little more indirect. All of these regions have an impact on a company's success and investor sentiment surrounding its shares.

Regulations that will have a significant influence on businesses, for example, will impact their bottom line outcomes. If businesses are expected to improve their bottom line, investors will pay closer attention and be more inclined to buy the stocks of these firms. Investors are less likely to purchase stocks when anticipated to have a detrimental impact on the bottom line.

One of the underlying reasons that bank stocks, for example, rose following the election of President Donald Trump is because of this indirect impact. His administration was anticipated to promote deregulation, and banks are likely to benefit from their loosening.

The economy, not politics, is the main factor in how a stock performs. Any investor buying equities is acquiring a stake in a company, not a particular political regime. In stock investing, it's the company's prospects that matter more than politics; however, politics can impact those prospects.