If 2024 is to be remembered for anything, it will be elections. This year, almost half of the world’s population will go to the polls.[1] That is a higher ratio than ever before and the surprise election in France this month only added to the total.[2]
This year’s elections spread across six continents. Among their number are some of the most influential economies on the global stage.
Fast-growing India, which has been a key allocation for the trust recently, completed its epic election earlier in the year. Still to come is the US election, which could result in a seismic policy shift in that territory.
Generally speaking, elections are less significant than they initially appear. Of those that have taken place this year, many of the outcomes stand out for their stability – by either a continuation of the status quo or through a major mandate granted. Both India and Indonesia, two of the global markets’ success stories, fall into the former category. While the UK clearly falls into the latter. The French election stands out precisely because its outcome was such an exception to this rule.
When we evaluate the investment risks and opportunities of elections for Bankers Investment Trust, we are fortunate to be able to draw on the expertise of our four regional investors.
Whether that’s Sat Duhra in Asia, Jamie Ross in Europe, Junichi Inoue in Japan or Jeremiah Buckley in North America, their on-the-ground exposure give us direct insight into the election cycle. This informs any portfolio adjustments that may be needed.
While elections fuel the news cycle, they have a different influence on markets. Volatility in the short term can predate a vote. What follows an election are currency reactions, reflecting the relative stability indicated by the outcome of the vote. These are then followed by bond yields and then finally equity prices. The latter is influenced most by real policy implications, not least in tax terms, and also changing attitudes to trade. Both of these can take several months to fully emerge.
When investing with a longer view, the role of fund managers can be holding their nerve as much as heeding any election outcome. Such it has proven in 2024 so far.
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[1] Source: International Forum for Electoral Systems https://www.electionguide.org/
[2] Source: Goldman Sachs https://www.goldmansachs.com/intelligence/pages/how-the-worlds-record-share-of-elections-ripple.html
Glossary
Bond Yield
The level of income on a security expressed as a percentage rate. For a bond, this is calculated as the coupon payment divided by the current bond price. There is an inverse relationship between bond yields and bond prices. Lower bond yields mean higher bond prices, and vice versa.
Volatility
The rate and extent at which the price of a portfolio, security or index, moves up and down. If the price swings up and down with large movements, it has high volatility. If the price moves more slowly and to a lesser extent, it has lower volatility. The higher the volatility the higher the risk of the investment.
Disclaimers
There is no guarantee that past trends will continue, or forecasts will be realised.
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