The election year: what does it mean for investments?

Rory Brand

Rory Brand

Chartered Financial Planner

24 May 2024

The recent announcement of the upcoming General Election, set to happen on 4 July, may result in some hustle and bustle over the next six weeks. Our Investment Partners, Square Mile Research, have provided their thoughts on the impact of elections in 2024 below.

"Without a doubt, 2024 is a big year for elections. In the next 12 months, over 64 countries plus the EU, are heading to the polls. 

The prospect of any election in any country brings with it an inherent unpredictability, particularly if new parties come into power. Any changes in political leadership increase the chance of new policies or regimes, raising concerns among investors about what it may mean for their portfolios.

At the moment, specifically, the polarising nature of so many upcoming elections is an obvious cause for worry .and there is potential for wide-reaching implications on both a national and international stage.

Governments have the capacity to shape policies that can materially alter business decisions, impacting how corporations and organisations function. The allocation of public funds by political parties is another element capable of shaping the economic backdrop. Election outcomes could, then, affect companies - positively and negatively.

Investors may, therefore, try to anticipate election results, to get ahead of the curve. But is that the best approach? 

Looking at the long term

Accurately predicting election outcomes is extremely complex, if not impossible to achieve consistently. Instead, while politics should be considered throughout investment decisions, they should by no means be the sole focus for investors. Politicians may talk a great deal about what they say they will do, but in reality, very few changes are ever made. For example, in the US, only approximately 50% of all legislation promised to the electorate is actually passed.

Moreover, staying with the US as an example, history has shown that there is no consistent pattern between the party in power and growth in Gross Domestic Product or returns on the US stock market. Economic factors tend to be bigger drivers of returns. For instance, looking back at the year 2000, another election year, returns were driven by the tech bubble. Or, in 2008, the driving factor was the global financial crisis, while 2020 was dominated by COVID - not who won the Presidential election.

With elections being incredibly difficult to predict, positioning portfolios on assumed election outcomes is a risky strategy. Even in the UK, where the next General Election will be between centrist political parties, making investment decisions, based on  the likely winner, remains precarious. Zoning in on what is happening in the economy is a better approach - especially when used in tandem with a long-term view." Square Mile Investment Management Team.

Investment Philosophy

Both Johnston Carmichael Wealth and our investment partner, Square Mile, use a long investment outlook for precisely this reason. Looking at the long-term allows our Investment Committee and Square Mile to position portfolios so that they are capable of performing in any economic condition.

When taken as a whole, our investment philosophy is one that is designed to weather the instability an election can bring. Or, in 2024’s case, 64 elections.

Our investment committee regularly review our investment strategies, which blend different fund managers with different investment styles, giving the best outcome.

If you would like to discuss anything mentioned in this article, or how it may affect you, please contact myself or one of our financial planners who would be delighted to help.

Disclaimer: Johnston Carmichael Wealth Limited is authorised and regulated by the Financial Conduct Authority.

Please note: This communication should not be read as financial advice. While all possible care is taken in the completion of this  article, no responsibility for loss occasioned by any person acting or refraining from action as a result of the information contained herein can be accepted by this firm. 

Views and opinions have been arrived at by Square Mile Research and should not be considered to be a recommendation or solicitation to buy or sell any funds that may be mentioned.

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