How an election-packed 2024 could swing world markets
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[January 10, 2024] LONDON
(Reuters) - Countries making up over 60% of the world's economic output
and more than half of its population hold elections this year.
Markets face a "ballot box bombshell", financial services group
Morningstar says, adding: "prior experience of this kind of event risk
shows big changes can cause sell-offs".
Here's a look at the elections that matter for markets, in roughly
chronological order for the coming year.
1/ TAIWAN
Date: Jan 13
Back story:
Taiwan's ruling Democratic Progressive Party (DPP) is competing mainly
with the opposition Kuomintang (KMT) for the presidency and legislature.
A DPP win would be the third consecutive victory for a party China calls
separatist, potentially fuelling Beijing's determination to control
Taiwan. The KMT traditionally favours closer ties with China but denies
being pro-Beijing.
Market risks:
Taiwan is the main flashpoint in U.S.-China tensions. Investors, fearing
sharpened trade tariffs, have slashed China allocations.
A full-blown Chinese invasion of Taiwan, while seen as unlikely in 2024,
would be a potentially catastrophic risk to global markets, including
potentially halting advanced chip-making and wiping $1 trillion off
annual global economic output, U.S. officials said.
2/ EUROPE
Dates: March 10 (Portugal), June 9 (Belgium), June 6-9 (European
Parliament), autumn/winter (Croatia), November (Romania), to be
confirmed (Austria)
Back story:
November's shock win for Geert Wilders's Freedom Party in the
Netherlands galvanized the Eurosceptic far-right. Its namesake leads
Austria's polls. Portugal's Chega party's vote may double, though left
parties lead there.
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Crucially, far-right parties eye gains in the European Union's
legislature, vowing to toughen migration policy and soften green
reforms.
Market risks:
Italian stocks and bonds, Europe's top 2023 performers, may suffer if
gains for eurosceptic parties are seen as weakening the commitment to
European integration.
The EU raising joint debt to back the post-pandemic recovery has helped
reduce the perceived riskiness of Italian debt.
With the EU parliament heavily involved in legislation and electing the
next head of the bloc's executive, watch the readout on further support
for Ukraine and climate policy.
3/ RUSSIA:
Date: March 17
Back story:
Vladimir Putin, who was handed the presidency by Boris Yeltsin on the
last day of 1999, is certain to win another six years in power. Polling
shows Putin enjoys approval ratings of above 80% in Russia. Opposition
politicians say the election is a carefully stage-managed imitation of
democracy.
Key market risk:
In the campaign, Putin may reveal more of his thinking about the war in
Ukraine. Putin has warned the West any attempts to meddle in the
election will be considered an act of aggression.
Western governments such as the United States and Japan are considering
seizing frozen Russian assets such as cash and government bonds held by
its central bank overseas. Russia has said it will retaliate if that
happens.
Russia's economy has been boosted by massive increases in defence
spending on the war, though stubborn inflation fanned by a sharp rouble
depreciation has forced interest rates higher.
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4/ INDIA
Date: April-May, TBC
Back Story:
Narendra Modi is expected to win a third term as prime minister leading
the Hindu nationalist Bharatiya Janata Party (BJP) in national
elections. Investors moving cash out of China have turned to India.
Key market risk:
Persistent inflation could hurt the BJP. Modi would need to form a
coalition if it doesn't win an outright majority.
Key commodity exporter India has roiled markets by restricting rice,
wheat and sugar exports. A shift back to fiscal populism risks pushing
up India's fiscal deficit which would need funding from potentially
record high domestic market borrowing.
5/ MEXICO
Date: June 2
Back story:
Presidential election will involve a full Congress reshuffle and nine
state elections. Polls give incumbent National Regeneration Movement (Morena)
party and its candidate, ex-Mexico City mayor Claudia Sheinbaum, a wide
double-digit lead.
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A woman on a motorbike rides at a morning market in Taipei, Taiwan
January 10, 2024. REUTERS/Ann Wang
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A more balanced Congress preventing constitutional changes from
populist Morena is anticipated. But given the success of current
President Andres Manuel Lopez Obrador's spending drives, Sheinbaum
is expected to follow suit.
Key market risk:
Heftier spending could pull down Mexico's peso and hurt government
bonds.
6/ SOUTH AFRICA
Date: May-August 2024 (TBC)
Back story:
The ruling African National Congress risks losing its parliamentary
majority in elections for the first time since Nelson Mandela led it
to power in 1994.
Economic turmoil, power cuts, austerity and graft allegations have
alienated voters. The ANC may need to partner with the Democratic
Alliance or the Marxist Economic Freedom.
Key market risk:
Pre-election, the government could ease austerity, pushing up debt.
If the ANC allies with a leftist party, social spending could rise.
Worries about a weak currency and public finances could slow down
rate cuts.
7/ UNITED STATES
Date: Nov 5
Back story:
Donald Trump is predicted to win the Republican nomination in
primaries in the coming months, setting the stage for a tight battle
with Democrat incumbent Joe Biden - a rerun of the 2020 election
that ended with a pro-Trump mob storming Congress in an attempt to
block certification of Biden's victory.
Trump now faces criminal trials in four jurisdictions and an array
of other legal cases, while he still claims falsely that the 2020
election was stolen. Biden calls his opponent a threat to democracy
who would seek vengeance on his many foes if he regains power.
Market risks:
Markets shrugged off the violence that followed the election four
years ago. But given the heated rhetoric on both sides this time
around, a Trump-Biden rematch could still worry investors over the
risk of social unrest.
A bitter election could affect consumer sentiment as the world's
biggest economy seeks to avert a recession from the lagged effects
of aggressive interest rate rises.
The dollar could swing on election probabilities.
Stocks could be hurt by caution over U.S.-China tensions if the
parties harness the popularity of trade barriers, with analysts
saying higher tariffs would fuel inflation, force up the dollar and
hurt the yuan, euro and Mexican peso.
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Spending cut pledges by either party could upend a complex but
popular U.S. bonds trade that wagers government borrowing will
increase. And watch oil: Trump favours more U.S. drilling, which
Biden has reined in.
8/ BRITAIN
Date: due by Jan 2025, expected by end-2024
Back Story:
The opposition Labour party under centre-left candidate Keir Starmer
leads the ruling Conservatives in the polls.
Market risks:
Pre-election, a stagnant economy and tight fiscal budget mean
government bonds could be unsettled by any surprise spending
promises. A March 6 budget might well contain new tax cuts.
Labour plans to loosen planning rules, in a risk for house-builders
and make targeted changes to tax rules which could hurt energy
companies. It also wants closer relations with the European Union
following Brexit, which could boost sterling.
9/ VENEZUELA
Date: 2024 TBC
Back Story:
Incumbent Nicolás Maduro has an advantage in presidential elections,
with main opposition candidate, María Corina Machado, banned from
participating due to alleged crimes such as supporting U.S.
sanctions on Maduro's government and backing former opposition
leader Juan Guaido.
Key Market Risk:
In October, the U.S. lifted oil sanctions for six months and debt
sanctions indefinitely, allowing U.S. investors to trade in some
bonds in exchange for talks to ensure fair and free elections.
Re-instated sanctions could shake Venezuelan stocks and bonds.
Pricing deeply distressed, bonds more than doubled after sanctions
were lifted. A possible debt restructuring is also in focus.
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(Reporting by Naomi Rovnick, Jorgelina do Rosario, Libby George,
Karin Strohecker and Marc Jones in London, Yoruk Bahceli in
Amsterdam; Editing by Dhara Ranasinghe and Peter Graff)
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