Why might market volatility increase during elections?

Market volatility often increases during elections primarily due to investor behavior in response to the potential economic implications of the election outcomes. As elections imply a choice between different political candidates and parties, investors anticipate how these choices could impact economic policies, regulations, and overall market conditions.

For instance, differing policies regarding taxes, trade, and government spending can lead to uncertainty about future profit margins for companies. This uncertainty causes investors to adjust their portfolios, leading to increased trading activity and price fluctuations. As they react to news, polls, and debates, the market can become more volatile due to the speculative nature of these decisions.

In contrast, while unexpected earnings reports, new trading platforms, and recent changes in interest rates can influence market behavior, they do not have the same acute and immediate impact on market sentiment that election-related news does. Investors tend to focus more on the broader implications of political changes during election periods, which can drive heightened volatility.