Dear Friends,
In today's world, the pursuit of financial freedom is
becoming increasingly important for individuals and societies. Financial
freedom is the ability of a person to meet their financial needs and choose the
lifestyle they desire. In this pursuit, trading in financial markets is a
critical step towards achieving financial freedom. Many people consider trading
in financial markets as an effective way to achieve this goal. With the right
knowledge and skills, it is possible to generate passive income, achieve returns,
and reach our financial goals through trading in financial markets. This way,
we can move away from financial worries, focus on other aspects of our lives,
make retirement plans, and maintain the lifestyle we desire by controlling our
financial situation.
Sometimes, even when we perform accurate technical analysis
while trading in financial markets, we may not achieve the desired results.
This may be because we overlook fundamental analysis data. News such as
political events, elections, geopolitical tensions, and terrorism can affect
the markets. In such cases, technical analysis may be insufficient for trading.
The best approach in financial trading is to use both technical and fundamental
analysis together. One of the data included in fundamental analysis is news
related to political events and elections. Such events can have an enormous
impact on financial trading. Now, we will explain this with examples.
POLITICAL EVENTS
Political events included in special news can shake the
confidence of all market players. For example, a sudden political crisis or a
change of government in a country can create uncertainty in the markets,
leading to sudden fluctuations in stocks and other assets.
July 15 Coup Attempt:
On the night of July 15, 2016, a group of soldiers attempted
a military coup to overthrow the government in Turkey. During the coup attempt,
many critical locations were seized, media outlets were pressured, and chaos
was created across Turkey. The then-president Recep Tayyip Erdoğan called on
the public to take to the streets and resist the coup plotters. This call was
met with widespread participation from the public, and many people took to the
streets. During the coup attempt, clashes occurred between civilian resistors,
police, loyal soldiers, and the coup plotters. Many people lost their lives and
were injured in these clashes. The coup attempt ended in failure thanks to the
resistance of the public and security forces. The coup plotters were quickly
neutralized, and control was restored to the government. After the coup
attempt, a state of emergency (OHAL) was declared nationwide in Turkey, during
which many people were detained or arrested.
The coup attempt also had a tremendous impact on the
international community. Many countries and international organizations issued
statements in support of Turkey's democratically elected government. July 15 is
commemorated in Turkey as "Democracy and National Unity Day" and is
remembered each year with various events. This day has become an important
symbol to honor the memory of those who resisted the coup attempt.
The impact of the July 15, 2016 coup attempt on financial
markets was quite pronounced and led to significant fluctuations in various
economic indicators. Immediately following the coup attempt, there were sharp
declines in the Istanbul Stock Exchange (BIST). On July 18, the first trading
day after the attempt, the BIST 100 index lost more than 7%. Take a look at the
weekly chart of the BIST 100 Index below:
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| BIST 100 weekly chart Post-Coup 2016 |
This event not only affected the stock market but also had a
negative impact on the foreign exchange market. During and after the coup
attempt, the Turkish Lira (TRY) experienced significant depreciation against
the US Dollar (USD) and other foreign currencies. The USD/TRY exchange rate
rapidly rose immediately after the attempt. The Central Bank of the Republic of
Turkey (CBRT) implemented various measures to calm the markets and provide
liquidity. These interventions were aimed at preventing further depreciation of
the TRY in the short term. Take a look at the daily chart of the USD/TRY
exchange rate during that period:
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| Turkish Lira vs. US Dollar chart after 2016 Coup |
Brexit:
Another political event that affected financial markets is
known as "Brexit." Brexit, a combination of "Britain" and
"Exit," refers to the United Kingdom's (UK) departure from the
European Union (EU). The process of the UK leaving the EU began with a
referendum held on June 23, 2016. In the referendum, 51.9% of British voters
chose to leave the EU, and the process was officially completed on January 31,
2020. There are several main reasons behind the Brexit decision. One of them
was the UK's contributions to the EU budget and the use of EU funds. Brexit
supporters argued that financial contributions to the EU were a burden on the
UK economy. Another reason was related to Immigration and Border Controls. The
EU's free movement policy increased the flow of immigrants to the UK. This led
to growing concerns about immigration among some segments and a desire for the
country to independently determine its immigration policies. Many British
voters believed that the country's EU membership restricted its national sovereignty
and decision-making authority. Brexit has been a critical event not only for
the UK but also for global financial markets. From the beginning of the
process, it created uncertainty and volatility in the markets, affecting the
risk perception of traders and investors.
Brexit uncertainty also caused volatility in stock markets
across Europe, and some sectors were negatively affected. In the days following
the referendum, there were dramatic declines in the London Stock Exchange (FTSE
100 and FTSE 250 indices). The impact of the Brexit referendum on the FTSE 250
Index is shown in the chart below:
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| Brexit Impact on FTSE 250 Index |
There was also significant movement in the forex market. Immediately after the referendum result was announced, the British
Pound (GBP) experienced a sharp decline against the US Dollar (USD) and the
Euro (EUR). The Pound fluctuated in the period following the referendum and
generally traded at a lower level. The impact of the Brexit referendum is shown
in the daily chart of the British Pound/US Dollar below:
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| Brexit Effect on GBP/USD Chart |
ELECTIONS
Elections are also among the special news events that can
affect financial trading. When we talk about elections, we generally refer to
the process in which the citizens of a country vote to elect their government
or specific public officials. These processes have a direct impact on how the
government and policies will be shaped in the future. The effects of a new
government's monetary policy can influence interest rates and, consequently,
borrowing costs. Changes in interest rates have direct effects, especially on
exchange rates and bond markets.
2016 US Presidential Elections:
The 2016 US Presidential Election was followed with great
interest worldwide, and Donald Trump's election as president had far-reaching and
complex effects on financial markets. Trump's election led to a major surge in
the stock market due to his promises of tax cuts and deregulation. During his
campaign, Trump pledged substantial tax cuts, particularly reducing corporate
tax rates. In 2017, the tax reform law passed under the Trump administration
lowered the corporate tax rate from 35% to 21%. Tax cuts were positively
received by the markets with the expectation that they would increase corporate
profits and thus boost stock values. As a result, investors increased their
demand for stocks, and the stock markets surged. In the days and weeks following
the announcement of the election results, US stock markets experienced a
significant rise. Major indices such as the Dow Jones Index, S&P 500, and
Nasdaq saw substantial gains. In the daily chart of the S&P 500 Index
below, you can observe the surge following the US Presidential Election on
November 8, 2016:
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| S&P 500 Surge Post-2016 US Election |
Remember: In financial markets, there is a chance of achieving high profits as well as the risk of losing money. Emotions like fear, impatience, and greed can lead to poor decisions in financial markets. Therefore, only trade with money you can afford to lose. Instead of making emotional decisions while trading, always act with knowledge-based strategies. Learn to assess market conditions well by using both technical and fundamental analysis tools to create a successful trading strategy.