When assessing the market performance around an election, we need to take into account the prevailing economic climate and monetary policy.

2024 is expected to see key elections around the world, including India, Indonesia, Russia, South Africa, Taiwan, the UK and the U.S. While these elections will doubtlessly hog news headlines and TV airtime, the impact on markets could be subtler.

Generally speaking, local asset markets could be more volatile ahead of the votes and perform more constructively once there is higher certainty about the future policy outlook. Of course, market reaction could show greater caution if there is a hung parliament, a fragile coalition or a new government that is perceived to be less business friendly. When assessing the market performance around an election, we need to take into account the prevailing economic climate and monetary policy.

In the U.S., we are probably too early in the election cycle to extrapolate the outcome and potential policy implications. That said, historical data suggest that the next president’s party affiliation has limited impact on market performance after the election result, as noted in the 2016 and 2020 presidential elections. Some of the current candidates for the upcoming U.S. elections have policy track records that can help mitigate uncertainty for investors. Investors are also likely to pay particular attention to the outcome of the congressional race, as the composition of the House and Senate in recent years has raised concerns over whether the federal government debt ceiling can be raised in time or if the potential passage of economic stimulus could be blocked by a minority of lawmakers due to slim majorities.

In India, the current opinion polls suggest that Prime Minister Modi’s Bharatiya Janata Party (BJP) could retain a majority, albeit a slimmer one, in the Lok Sabha (lower house of the parliament) in the general election that should take place around May 2024. This should allow the government to maintain its economic reform momentum and potentially attract more foreign investment into infrastructure and manufacturing.

For Indonesia, President Joko Widodo will need to step down as he completes his second term. The next president is seen to play a key role in the regions ongoing transition toward developing its infrastructure as well as harnessing its natural resources, including nickel, to be part of the new energy revolution.

For the economies of India and Indonesia, the potential for more reforms and continued efforts to develop their manufacturing industries would be constructive for long-term growth, especially as more international companies look for alternatives to reduce concentration in their supply chain and diversify away from China.

Taiwan’s presidential and Legislative Yuan elections on January 13, 2024 carry geopolitical importance as the presidential candidates’ campaign, and the outcome of the vote, could influence U.S.-China relations in the medium to long term. Nevertheless, we believe the global investment cycle and demand for semiconductors would be more dominant drivers of Taiwan’s equity market.

Exhibit 4:

Data reflect most recently available as of 30/10/23.