There is a life about to start, when tomorrow comes!
Across the continents of the world, voters head to the polls in unprecedented scale in 2024. The political landscape across the globe has the potential to change significantly.
After years of a widening economic gap between the “haves” and the “have-nots”, will voters choose ever-more populist politicians increasingly prepared to throw a wrecking ball at their own systems and structures of government? Or will political parties push back to the centre ground?
Ideally, investors would like the paths of politics and markets to be less intertwined. The global financial crisis forced politicians into entering the fray in a serious way for the first time in decades as governments had to serve as an emergency backstop after the excess of free markets went haywire in the banking sector.
Covid and recent fiscal support packages have reinforced this, so investors will be watching the outcome of a bumper election year with eagle-eyes.
The USA – Potential for fireworks = high.
“Remember, remember the fifth of November” demands the nursery rhyme as a cautionary reminder of the consequences of trying to destroy parliament with “Three score barrels of powder below”.
Come 5 November 2024, while in the UK we’ll be celebrating 419 years since Guy Fawkes and his conspirators failed, American voters will be casting their votes in their 60th Presidential election, the result of which has the potential for significant impact for markets.
While markets would accept the “least worst” option, the problem is that neither option looks great.
There will be fewer options for grand fiscal gestures whoever wins, with both Trump and Biden starting their respective first Presidencies with big fiscal spending plans (tax cuts with Trump, the Inflation Reduction Act for Biden), which have pushed the US debt burden and US deficit to levels that curtail further fiscal manoeuvres.
The differentiator could well lie in the sphere of geopolitics – the Trump presidency saw the pace of deterioration in US/China relations hasten and weigh on markets, while Biden sought to stabilise and maintain.
The pathway to either the eldest President or the most-indicted President will emerge through the year, but with America appearing more divided and polarised than for generations, the outcome couldn’t be more important, nor could be more binary.
The United Kingdom – Potential for fireworks = low.
As is oft quoted “Prediction is difficult, especially if it’s about the future”.
However, with the Conservatives polling appallingly, it doesn’t feel like the furthest I will stick my head above the parapet this year to predict we’re heading towards a Labour government at the next UK election.
While an election doesn’t have to be held until January 2025 at the latest, it is all but certain to be held this year. With the SNP under pressure from Labour in Scotland, a weakening in the Blue heartlands of the south and a battle to regain traditional Labour seats won in the north in 2019, it will feel like a long year for Rishi.
Whoever the incumbent is come election day, the one hope for UK markets will be a new government prompts a review by global asset allocators to take a fresh look at the UK market and its relative attractiveness.
UK assets have been under a cloud since 2016 and political uncertainty has made the UK market an easy one to ignore, first as the post-referendum relationship with the EU was unclear, then as the Conservative leadership jumped on a merry-go round of prime ministers and chancellors.
Russia – Potential for fireworks = none.
Putin will be paying a closer eye on the US elections rather than losing too many sleepless nights on his own Presidential election, which comes in March this year.
The biggest surprise is that the election will take place over three days before we find out what we already know: Putin wins.
Investment Rule #1 in an election year = DON’T TRADE ELECTIONS
Across Asia, Europe, Africa, and the Americas, as voters go to the polls, the key for investors will be to not allow portfolios to get dragged into a binary position reliant on the outcome of one election result or another.
The decline of liberal democracy in the face of a rise in populism and authoritarianism comes because of the rising inequalities within society and a resulting lack of solutions from traditional parties. So, for all the words that get spilt onto the pages of investment strategies, the most important point to note is elections do matter, none more so than in 2024.
