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Elections and investments – prepping for a pivotol year

Elections and investments – prepping for a pivotol year

Date: 9 May 2024 | By: cosgrove

Elections and investments - prepping for a pivotol year. Did you know that 64 countries are due to hold elections this year (including India, Brazil, the US and very probably the UK)? Some of these elections carry significant global implications and, depending on their outcomes, will influence the geopolitical landscape, and global and regional investment markets.

Investment implications
Markets don’t like uncertainty and elections and investments are intrinsically linked. Election years are typically marked by increased speculation and uncertainty, after all, a change in a country’s leadership or policy direction can affect everything from commodity prices to its stock market, influencing investor sentiment. From a UK perspective, because 70% of revenues earned by FTSE 100 listed companies are derived overseas, domestic shareholders will be keeping a close eye on election results worldwide as they could have wide-reaching implications. The election outcomes will be important in terms of trade policies, supply chains and access to commodities, for example.

The elephant in the room
With the US election scheduled for 5 November, the world’s largest economy will be under the microscope, as North America sets the tone for global economic policies on trade, regulation, and fiscal stimulus. The race to the White House is likely to see a Biden / Trump rematch, and while Democratic presidents are usually better for the US economy, and for investment returns in general, given his low approval rating, the re-election of President Joe Biden is far from certain. An election victory for Trump,
despite numerous legal issues, could create waves as investors focus on the likely implications for the US
and the rest of the world.

Keeping an eye on developments
As ever with investing, it’s important not to be distracted by short-term ‘noise.’ Uncertainty surrounding
election outcomes and the potential for policy changes can sometimes cause short-term fluctuations in asset prices. Keeping an eye on political developments is worthwhile but there’s certainly no need to be overly concerned about how an election year could affect your investments over the longer term. Preparing for potential market volatility by establishing a well-diversified investment portfolio,
aligned with your long-term financial objectives and managed to meet your personal financial goals, is ideal as we all need to keep an eye on elections and investments.

Source: Essentially Wealth Q2