Business Cycles in Election Years
Someone recently asked me if our business is being affected this year because it is an election year. My quick response was that it doesn't directly affect our business. Having an inquiring mind, I did some digging on the topic. There are reasons that election years affect business cycles. After researching some economic facts, I found some interesting arguments about how an election year can impact our businesses.
Typically, an election year brings uncertainty to future policy decisions. Policies implemented or enforced regarding labor laws, taxes, and regulations affect our businesses. Often, political parties are traditional in their tax and regulation policies. As business owners, we are on guard to save our cash flow for future increases in the cost of doing business, and we will hold back cash until we know the certainty about future costs. Also, elections influence the mood of consumers. Consumers who feel good about the candidates and the election results increase spending. If not, as businesses do, they hold their cash for future uncertainty.
Next, an election year can bring increased government spending. Elected officials are more willing to pump money into the economy to boost their chances of re-election. This sounds familiar with the current situation in Washington with this administration. Also, the Central Bank tends to lower interest rates to increase borrowing for economic growth. Is this a preview of where interest rates will trend this fall? We’ll see.
Election years also influence the stock market. If investors feel good about the direction of the election, they tend to invest more heavily in equities. The more money that enters the stock market, the more demand there is for stocks. Increased demand for stocks creates higher prices for equities we invest in the market and 401K accounts. Also, certain businesses rely on government spending for their revenue. Healthcare, defense, and energy sectors may benefit from the policies of current elected officials or candidates, who are likely to boost the economic fortunes of companies in these categories. There is potential that the stock market will react in anticipation of specific candidates, or party majorities, being elected that will aid these businesses.
There is some evidence that the economy is variable during an election year, and there are theories politicians inflate the economy during election years. Over time, business cycles smooth out and return to historical averages. When the government distributes money to the people, it must be paid back. Whether we invest in our businesses or equities, looking at the long game is always advisable.
After digging into the economic impact of the election on our industry, I don’t know anything that anyone else may not. But I do have a better understanding of the influence an election year can have on the economy.
As it is six months into 2024, we have a good idea what the rest of the year holds for the timber industry. Supply and demand will always rule the local economy for our products. When we overproduce a market, prices go down. When demand exceeds our production, prices go up. Stay in contact with the buyers of our production, and always look at wood decks and wood yards. Also, make plans to attend the GLTPAs Logging Expo September 5-7. It is a great place to network with the industry.
Finally, if you like to golf or support the Earl St. John Education Fund, we have some spots left for golfers and sponsors. The registration for golfing always fills up, and we have to turn teams away, so use the registration forms in this magazine or call Beth at FISTA to sign up. We don't disappoint in fun.
Troy Brown,
GLTPA President