Insight

Navigating the 2024 election year and investment implications

Navigating the 2024 election year and investment implications

We expect 2024 to be a year of partial normalization with a “bumpy landing” for the US and much of the global economy, especially the rest of the West. 

Bumpy due to continuing market volatility and geoeconomic shocks as major developed market (DM) and emerging market (EM) economies continue to adjust to an evolving new world order.

As the heaviest electoral calendar of the last 7 decades opens in 2024, political risk and uncertainty seem manageable in most economies. 

Still, we look to see how domestic politics start to reshape geopolitics and whether there could be another wave of populism sweeping around the world. 

Longer-term changes are also well underway in the global economy, including trade and investment diversion driven by national-security, climate transition and domestic political goals. 

We believe these restructurings in the global economy call for selective diversification by asset class and country/region instead of the concentration in passive, long-duration, capital-gain-oriented strategies that have captured market attention in the decade and a half since the Global Financial Crisis. 

Taiwan

Taiwan’s presidential and legislative election on 13th January is the first major election of the year with important geopolitical and market implications. Election results should be clear same-day evening time. 

The latest and last public opinion poll on 2nd January1, continue to show a competitive presidential race, with incumbent VP (William) Lai Ching-Te of the Democratic People’s Party leading his two opponents. Lai has only around a 5% point edge over his closest challenge2, a margin much smaller than his predecessor President Tsai when she won by double-digits in the 2016 and 2020 elections.

Although Lai has made pro-independence remarks in the past, he has recently publicly committed not to declare independence and maintain the cross-strait status quo. 

Even though I believe that markets would cheer a victory by Hou Yu-ih of the Kuomintang Party (KMT) because the party has historically had much better relations with mainland China, I believe that a Lai victory would be a neutral outcome because the DPP is also expected to lose its parliamentary majority. 

Thus, all eyes will be on Beijing’s response to a prospective Lai victory coupled with how well the KMT presidential and legislative candidates perform.  

It’s possible that China may respond to Lai’s victory or a poor showing of KMT in the legislative elections, with additional shows of force to signal willingness to use any means for reunification. Yet we would expect this to pass without any major disruption beyond short-term volatility unless there are actual moves to independence. 

Separately, the United States has discouraged any talk of Taiwanese independence yet has stepped up military support for Taiwan even as it re-engages with China to avoid accidents. We see this three-faceted approach – Taiwan avoiding independence; China’s warnings; US deterrence – as stabilizing. 

United States

The greatest uncertainty is about the US presidential election. Whether incumbent Biden or former President Trump is reelected, the victory will probably be wafer-thin. 

Trump may contest the result if Biden is declared winner, in the courts as Al Gore did when the second President Bush won. There is also a risk that Trump would contest the result in the court of public opinion, triggering protests or another uprising, as on January 6, 2020.

Political uncertainty and risk are highest ironically in the United States itself, long perceived as among the least risky in the world. Paradoxically, we believe it is prudent to maintain a significant US exposure because it remains a safe harbor and could well be a beneficiary if prominent policies in candidate Trump’s platform materialize as they did in Trump I.

The even greater global risk is that if Trump were re-elected, he might pursue a more radical version of his America First and Make America Great Again agenda. 

An aggressively unilateralist or possibly isolationist stance towards the rest of the world cannot be ruled out. This might include NATO withdrawal; less support or a hard/early stop on Ukraine funding; greater protectionism against both allies and adversaries; resumed onslaughts against American institutions, norms and rules; and the like. Resumed attacks on the Fed or individual policymakers including the Chair cannot be ruled out. 

Such moves might create high volatility in global markets, in which, paradoxically the United States might remain the safe harbor that it has been throughout the modern era. 

A major bout of global risk-off behavior cannot be ruled out, especially in the assets of countries that depend on US trade, investment or military support. Great uncertainty and market volatility cannot be ruled out, which might challenge global financial and economic performance. 

UK

The UK election is widely expected to result in the first major change of governing party in almost a decade and a half, from Conservative to Labour. Yet this change seems likely to be less disruptive for the UK economy than recent turnover across Tory governments or Brexit itself, given Labour’s swing back to the political center under Sir Keir Starmer from the radicalism of previous leader Jeremy Corby. 

National elections that matter to global markets

13-Jan  Taiwan General Election 
14-Feb  Indonesia General Election 
Feb  Pakistan 
17-Mar  Russian Presidential Election 
Apr  India Election Starts 
10-Apr  South Korea Legislature 
15-May  South Africa 
May  India Election Closes 
02-Jun  Mexico General Election 
05-Nov  United States General Election 

Source: National authorities, Wikipedia, Invesco. For illustrative purposes only. As at 25 August 2023. Notes: Some election dates are not yet final. 

India

In India, recent state elections have gone well for the ruling BJP not least because of PM Modi’s personal popularity, charisma and track record. Modi may be the most popular elected leader of any country with 70-80% approval ratings3. There have been significant upsets against polling results before, but they tended to be in more challenging rather than positive economic times as now. 

Russia

President Putin seems very likely to be reelected within Russia’s “managed democracy” given his influence over Russia, the political system and his apparently still high personal standing despite the costs of the Ukraine War, which itself could well drag on with Putin’s reelection. 

With contribution from Arnab Das

Reference:

  • 1

    Taiwanese election law prohibits the release of public opinion polls within 10 days of the election – the final polls are from 2nd January 2024.

  • 2

    Source: My Formosa, TVBS Poll Center, Taiwan Public Opinion Foundation. Polls released between Dec. 29 and Jan. 1. Note: Taiwan does not allow new opinion polls to be published within ten days of the election on January 13th.

  • 3

    Source: The Times of India, Dec 9, 2023

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