What the election means to sharemarkets

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In the 14 elections since 1983, the average return of the market during the five-week campaign leading to election day is 1.7 per cent.

Elections are a time of national and economic reflection with questions asked about what we can do differently now to create a better tomorrow.with a markedly different tone than three years ago. Back then, battle lines were drawn around the topics of future investments and taxation.

History tells us the market takes a pragmatic view on elections. While these times throw up uncertainties, investors can look beyond the campaign slogans. This is no better evidenced by the 1.8 per cent rise in the market in the lead-up to the 2019 election, despite the opinion polls at the time pointing to a Labor victory on its agenda of tax equalisation and investment reform.

Pleasingly, there have only been two periods where markets were negative both in the lead-up to and after an election. The 1990 election was won back on the hopes of a large surplus fuelled by rampant asset value growth, which by September quickly deteriorated into the “recession we had to have”.The same occurred in 2007 with the election held 24 days after the market all-time peak in November that subsequently saw the onset of the GFC in 2008.


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