Lately, the drama on Capitol Hill has been giving “House of Cards” a run for its money. Here’s how political tension — at home and with other countries — can affect your wallet, too.
Your 401(k) can have a bad day. When politicians and world leaders fight, the future can seem uncertain. That stresses out investors. When investors freak out, they tend to sell their riskier investments (stocks). Which makes for a bumpy market. Exhibit A: China and the US. In early August, the trade war took a hard left turn from bad to worse. And the stock market had its worst day in 2019. (Psst...it’s not just politics. The stock market is notorious for not keeping its cool. Everything from company earnings reports to tweets from the prez can upset investors.)
You could pay more at the pump. When countries that produce a lot of oil (think: Venezuela, Iran, Libya) experience unrest, oil and gasoline prices can go up. That’s because crises can create concern over that country’s oil supply. High school Econ class throwback: low supply leads to higher prices. That can increase what you pay for everything from gas to plane tickets.
Your money may not stretch as far. The value of the US dollar is basically a vote of confidence (or not) in the future of the country. Big political headlines can shake that. Ask the Brits. Since Brexit become a thing in 2016, the pound has taken a beating. And recently dropped to a two-year low on fears that the UK will divorce the EU without a good plan in place. A weak currency in your home country makes it more expensive to travel abroad and buy things made in other countries. On the flip side...now’s a good time to book that trip to see Westminster Abbey.
theSkimm: Political drama doesn’t just take over your Facebook feed. It can affect your money, too — from what you pay for everyday expenses to how much money is in your retirement account. If you’re someone who stresses over every stock market move, you might want to take a day (or two) off. The market has a looong history of bouncing back. So hang tight and avoid making any knee-jerk moves. Namaste.