Election time can strike fear in the hearts of investors. Many may ask what the implications are to financial markets and thus their own portfolios during what feels like an even more uncertain future. And whilst it’s true there are significant differences in the two major party’s proposals that may impact some investors, looking at the larger picture of economic policy, both express similar commitments to improving our country’s financial standing, open markets and free trade.
If we look to history on markets and election time, there’s hardly a correlation between markets returns and elections. In the last ten elections (from 1990), there’s only been one year where market returns produced a negative. This is a small sample size and doesn’t really tell us if election times are good or bad for markets, only that market influences come from everywhere, not just political circumstances domestically.
There’s also not much evidence to suggest that market performance is better when a particular government is in control. Since 1990, the changes in government from the two major parties bear no correlation with market returns.
|Period in Government||Party||Market Return – Australia 1||Market Return – International 2|
|Mar 1983 – Mar 1996||Labor||16.61||16.64|
|Mar 1996 – Dec 2007||Liberal||13.63||6.75|
|Dec 2007 – Sep 2013||Labor||0.49||0.52|
|Sep 2013 – Apr 2019||Liberal||8.36||14.05|
|1 S&P/ASX 300 Index (Total Returns)|
2 MSCI World Index (net div, AUD)
If you look at the bigger picture, markets are influenced by many external factors including the economic environment, competition, demand and geopolitical events, to name a few.
The important thing for investors is to have a diversified portfolio that includes the benefits of international equity, and across many asset classes to help reduce the risk of permanent loss of capital.
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Disclaimer: This post has been prepared for general information purposes only. It is not specific advice to any particular person. You should consult an authorised Align Financial adviser before making financial decisions. Align Financial | Financial Planner Northern Beaches | Servicing North Narrabeen, Narrabeen, Mona Vale, Elanora Heights, Newport, Avalon, Palm Beach | Enquire with us online.