A big year for local and global elections – what this means for investors

Kondi Nkosi

This year, more than 20% of the world’s populations will be going to the polls, as over 40 major elections will be held in 2024 – including our own national elections happening this week.

“Politics has become a significant source of volatility in financial markets, more so than in the past,” says Kondi Nkosi, country head in South Africa for global investment manager, Schroders.

“It’s become increasingly important for investors to be conscious of the political backdrop when making investment decisions. After all, government policy changes can have a profound effect on a company’s future profitability,” he says.

“This is not to say that investors should try to predict the future. There have been a number of elections in recent years which resulted in surprising outcomes, so it’s best for investors to focus on long-term investments they believe can ride out political storms and news flow” he explains.

Implications for investing in a time of political change

Johanna Kyrklund, Group Chief Investment Officer says:
“Politics can create short term noise. Although the market likes to focus on events like elections, political trends tend to play out over months and years.

“But if you can withstand the volatility, it’s best to sit on your hands and wait for it to pass.

“If you really have to trade, then it may be wise to bank any profits before an election. But investors should always avoid knee jerk reactions when results come out.”

Alex Tedder, Co-Head of Equities says:
“Short-term market setbacks, like those created by political uncertainty, can prove very helpful for more patient investors looking to generate returns. Over the long term, we still feel that this is a bigger determinant of investor returns than trying to respond to political events.”

Alex Monk, Portfolio Manager, Global Resource Equities says:
“The US election in November 2024 will be most important for energy transition equities, given the risks to
Inflation Reduction Act (IRA) support in a strong Republican win.

“Although support to energy transition sectors is unlikely to be removed in its entirety, the leading runners for the Republican nomination have talked about repealing aspects of the policy, making the risk of a reduction in support a credible threat.

“Regardless of the ultimate outcome, we would at least expect those names that currently benefit most from the policy to experience volatility as the election looms.

“Outside of the US, major elections in Taiwan, India, Mexico, South Africa, the UK, and Belgium among many others, must all be watched.”

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