Elections and the capital markets of the world


Poniedziałek, 26 października 2015

About how elections have a big impact on the capital markets of the world, you've probably found out the hard way. The effect of this, of course, is adequate to the degree of involvement of the different parties and politicians in the spheres of economic data and (what might happen) favour the media in building a positive image data of the candidates. The large amplitude fluctuations of stock indices often occurs only in the vicinity of the elections, after which it comes time to return to the analysis of hard data coming from the economies and stabilise cash flows. It may of course also be possible that adverse general public outcome of the election, maintain lasting negative impact on the economy of the country, and thus - the rate of return of specific financial instruments.

Experts of Private Wealth Consulting in the capital markets of the world, performed a broader analysis of the impact of elections in specific markets. Below we present you the results of work, which in many cases may be surprising.

Germany

The last elections in Germany took place on 22 September 2013. Once again proved victorious parties CDU / CSU, which won a total of 311 seats. To ensure a majority in parliament, 630 persons have entered into a coalition with the SPD, which gained 192 seats.

During the two weeks before the election (20 September 2013) DAX index gained + 4.8%. The day after the announcement of the voting results the German blue-chip index lost 0.47%, while in two weeks after the elections, the index worsened (-0.61%). Thus, it appears that the financial markets in Germany, above all undervalued expected results before the same date of the election, while the course of the next session after the vote points to a slight correction to adjust after hearing the official results of the election.

Author: Marek Arent

United States

In the United States operates an inexplicable phenomenon "presidential cycle". It is characterised by the fact that the third year of his presidency begins the best time to invest in this four-year period. It is the regularity known for the broad market, which is why I decided to look at what is happening in a much shorter period of time before and after the elections. It is about maintaining the index at 14 days before the election, the day after the election and 14 days after. Here, too, you will notice an interesting regularity.

When analyzing the last ten presidential elections the most profitable period for the investment is the last two weeks before the vote. Up to 8 periods ended in positive rates of return. Most could be made before the elections in 2008, more than 5%. Definitely they fared less investment within two weeks after the election. Only three periods ended positively. Here also inglorious first place comes the year 2008. It brought the biggest drop in more than 14%. Equally poorly looked quotation day after the election, also here only three times failed to achieve positive returns. Interestingly, if the day after the election ended with a positive rate of return, after 14 days of continued investment was on the rise.

Of course, one should not draw from this statement far-reaching conclusions, although it is clear that these statistics coincides with far wider audited presidential cycle. For elections usually nothing serious is happening, after the elections is best to escape to the bonds.

Author: Piotr Banasiewicz

Great Britain

The last parliamentary elections were held in the UK on 7th May 2015. An unusual situation compared to other countries is the fact that the islands elections are held on the first Thursday of May, and not, as in most countries, over the weekend. It is the result adopted in 2011 the Act on fixed-length term (Fixed-term Parliaments Act 2011).

In the elections won the Conservative Party which was in power for the last 5 years, but this time did not have to form a coalition government together with the Liberal Democrats.

Analyzing the last two weeks before the election, we can see that the index since the opening of 23rd of April at 7028 pts., still managed to grow from 7120 pts. (max of 27 April) and began to fall, to reach a low of 6811 points. just on election day. It gave a decrease of 4.3% from the maximum.

Then, the main index of the London Stock Exchange started to recover, in two weeks reached the level of 7013 points. (closure of 21.05.2015r.). Maximum during this period dropped at 7082 points. (+ 4%) in session on 11.05.2015r., Which is just two days after the election.

Author: Maciej Szustak 

Spain

Early parliamentary elections (to the Congress of Deputies and Senate) were held in Spain, November 20, 2011 year. They brought victory for the centre-right People's Party (PP) over the blames to launch a wave of the crisis the ruling Spanish Socialist Workers' Party (PSOE) - the ruling in Spain during the previous two terms. People's Party after the elections gained an absolute majority in the Congress of Deputies. The Socialists lost the election paid for adopted to combat the crisis austerity and for most of that time in all EU countries belonging to the OECD unemployment rate - up to 21% among working people.

Analyzing the behaviour of the Spanish stock exchange during the two weeks before the election and two weeks after the election can be observed a significant decrease in the index just before the elections (between 04.11.2011 and 18.11.2011) -4.62% to 8.310 points. with the bottom of the observed period achieved on 24 November at 7,721 points.

During the next two weeks after the elections (21.11. 2011 - 05.11.2011) IBEX index reached a value of 8.705 points. which resulted in an increase of 4.76% over the observed period.

We can conclude that before the election, investors approach their investment with greater caution and after completion to the expected script, as was the case with the parliamentary elections in 2011 in Spain, followed by fairly rapid and substantial recovery.

Undoubtedly, the analysed situation of the elections themselves and their outcome were important for the behaviour of the stock market during that period, but the socio-economic situation and the situation on the stock market in Spain deteriorated for a long time, and a mere reflection of the index although significant not turned into a permanent upward trend.

Author: Radosław Cabanek

China

China is a country constitutionally socialist. The Constitution of 1982 says that the highest legislative body is the National People's Congress on 5-year term basis. Last deliberations of parliament approving the selection of the individual positions and the appointment of the President Xi Jinping held from 5-10 March 2013. However, these are the choices facade, all the positions were already known. Therefore, it is difficult to be traced to their impact on the market.

Elections in China are held behind the closed doors. Everything is decided in advance, at the Congress of the Communist Party of China. Last, 18, in turn, held from 8th to 14th of November 2012. On which the current president has established the Chairman of the Party. One would therefore expect that during this period there may be an effect on the index, however, remained on a longer trend and the elections have not changed.

Author: Cezary Poławski

Japan

In the early general elections in December 2014 conservative Liberal Democratic Party (PLD) enjoyed a decisive victory. The vote took the form of a referendum in which voters had to comment on the economic recovery strategy, called abenomiką, named prime minister. By opting for the solution of the lower house in mid-term, Abe wanted to confirm his mandate. He pledged to resign if the Liberal Democratic Party lost its majority.

Abenomics based on so called, policies of the three arrows or monetary policy, fiscal and structural policy reforms. The first year of operation brought abenomiki but decent economic growth in the third quarter of 2014. GDP fell by 1.6 per cent., And besides, the most difficult structural reforms, such as increasing flexibility in hiring and firing workers, opening of agriculture to foreign competition in the market or order electricity suppliers, are still intact.

The Japanese will feel it very strongly in VAT increase, their salaries have not been able to catch up with the inflation. Therefore, Abe acknowledged that the government can not act so fast, you have to give the Japanese a chance to become very comfortable with the new situation. Another increase in VAT announced transferred in the spring of 2017.

The victory of the Liberal Democratic Party resulted in negative attitude of the investors. Tokyo Nikkei 225 index fell Monday, 17 December at 1.6 percent. The sell-off on the Tokyo stock exchange was called rather lousy moods przelewającymi the foreign markets than the election results, which were in line with expectations. After declining Monday stock market returned to levels from early December to end the year at 17 450 points.

Elections to the lower house of parliament in 2012, while Japan won the Liberal Democratic Party, winning 294 seats in the 480-seat parliament. It's almost 2.5x more than in elections held in 2009. Then the party won 119 seats.

In reaction to the election results the index of the Tokyo Stock Exchange rose by 0.94 per cent., And the yen depreciated by 0.5 percent. to the dollar. - The big success of the Liberal Democratic Party was in line with market expectations. The stock market reacted very positively ending with the 2012 result of 10 395 points. vs. 9737 points. the day before the election.

Author: Jolanta Kwaśniewska

India

Markets, as you know, cannot stand the uncertainty. The more the situation is sketchy, and the number of unknowns does not allow you to create a clear image, the more we risk the vagaries and capital comes into play highly speculative, sometimes completely ignoring the fundamentals. One such situation is the parliamentary elections, to be exact connotation to the political situation in the country, which then translates into the situation in the economy and of course the capital market. Let's briefly on the example of India, where in the spring of last year's elections were held for parliament. To the surprise of many observers landslide won by the opposition Bharatiya Janata Party (BJP) Narendry Modiego (current Prime Minister of India) won the majority needed to form a government. The reaction of the stock market do not have to wait long. BSE30 index shot up to finish the whole last year the result of almost 30%.

As already mentioned the scale of victory People's Party surprised the political commentators who put up a long post-election negotiations with regional parties. The situation, when the party can govern alone, happened for the first time since 1984 and definitely had a positive influence on the behavior of investors, especially foreign ones. Modiego choice for prime minister and the next few months of his reign, during which effectively and consistently implemented (implement) its election promises, provided only further fuel the growth in the stock market.

Author: Bartłomiej Grochulski

Brazil

The situation is somewhat different in another market trend,Brazil. There is recent parliamentary and presidential elections were held in the autumn of 2014 and ended with the result consistent with expectations and the distribution of political scene repeated what showed early elections in 2010. President once again is Dilma Rousseff, who won up to 41.6% of the votes in the first round and 51.6% in the second round, and in the parliamentary elections to both chambers, as in 2010, won by a coalition of parties supporting Dilma Rousseff at the forefront of Workers' Party (PT). The environment would seem ideal for strong gains in the stock market. But it turned out that it was not a lack of consensus among the ruling, but the biggest corruption scandal in the state concern fuel and falling prices of raw materials began to plunge the most important economy in the wake of her, as the stock exchange in Brazil.

Author: Bartłomiej Grochulski

Poland

The domestic market is extremely vulnerable to the effects of policy. Election period, both for parliamentary and presidential elections is special in terms of incoming information and the associated rapid change in sentiment, even within the same day, among investors. The fact is, however, that volatility is higher in the pre-election period, rather than the post-election. All thanks to promises made by politicians and disclosure of incriminating facts about rivals. As a result, each piece of information is analyzed and converted by investors for future value of the shares in the portfolio. Despite the efforts of politicians and groups, many election promises made to encourage the electorate to vote, unfortunately, can not be fulfilled by what the market returns to previous scenarios, and ultimately to stabilize.

Autumn parliamentary elections of 2007 are a period of exceptionally difficult to analyze due to falling then on world markets and the beginning of the peak of the bull market, as it turned out, the period of long-term bear market. The period of the next term elections, ie. 10 sessions before and after the elections, we can in fact be regarded as neutral - the amplitude of the fluctuations in the index that groups the largest companies WIG20 was up to +/- 2.8%. The election itself is also not made any whiff of freshness, the day after the election Index lost 0.40%.

Definitely interesting for analysis presented in the course of trading surrounding the elections in the autumn of 2011. 10 session before the election, the WIG20 index was 6.64% below the level of the previous elections. In the following 10 sessions, the index gained a further 5.25%. This period was therefore definitely successful.

If the next elections scheduled for October 25, 2015 would have affected the index in line with the outlook for the first time on November 23 the index should have a value of about 2100 points. However, if it would be a much more favorable second instance then analyzed index should rise to the level of around 2,230 points.

Author: Marcin Pawlak

Italy

The last general elections in Italy held on 24 and 25 February 2013 year. They were prompted by two months after the scheduled date of the decision by the People of Freedom party led by Silvio Berlusconi, who withdrew technical support for the government led by Prime Minister Mario Monti, which opened the way to speed up the election.

Pre-election polls indicated a victory for the center-left, giving it about 40 percent of the vote against the center-right with 24 percent support and block Mario Monti with the support of 15 percent. Attention deserved very high, 14 percent poll score for the controversial comedian BeppeGrillo, leader of the populist Five Star Movement.

Elections to the Chamber of Deputies has won the center-left coalition won slightly less than 30 percent of the vote, ahead of only 0.4 percentage points. the center-right coalition gathered around Berlusconi. Third place with a very high, 24% support took the populist Five Star Movement. In terms of voices strong lead in the lower house coincided with the center-left, in force since Italy's electoral system rewards the winner, giving the coalition 345 of the 630 seats in parliament. Otherwise, the matter was in the Senate, where none of the coalition did not obtain the majority - the center-left and center-right won 123 of 315 seats 117.

The elections of 2013 are an excellent illustration of the impact that politics has on sentiment in the stock market. Analyzing the period covering the two weeks before and after the elections, we see that from the beginning circled compartment to election day, the index was on a downward trend.

On the second day of elections, when it became clear that wins regarded as a more rational and predictable center-left coalition, the markets reacted more than propionate in an increase during the session - with the opening level at 16324 soared to a level 16,884th enthusiasm did not last long - investors have come toIt concluded that the lack of a majority in the Senate could lead to a coalition of groups centered around Silvio Berlusconi populists in the upper house, which can cause destabilization of the situation and possible early elections. The index ended the day at cosmetic growth of up to 16351 points. The next trading day after the election was marked by a huge sell-off - scared investors overestimated the index to the level of 15552 which gave almost a five percent decline.

It's hard not to get the impression that such large fluctuations were the result of emotional decision, the next day brought a calming moods and two weeks after the elections, the Milan stock market index recovered a large part of the losses, showing the level of 16024 points.

Author: Tomasz Kasprowicz

Turkey

Parliamentary elections in 2015 proved to be a difficult period for both the Turkish owners of the shares and the currency of this beautiful country. Turkey's ruling Justice and Development Party (AKP) won the parliamentary elections, but for the first time in 13 years lost its absolute majority and could not govern alone. Investor uncertainty, we have seen two weeks before election day, when we first unfavorable opinion polls and policy analysis for the ruling party. Nine days before the election it seemed that most of the negative scenario has already been disqualified by investors who have lost in this period more than 3%. On the first day after the elections, when polls before the election became a reality in the Istanbul Stock Exchange index lost more than 5% by establishing a local hole for his quotes. 1 November 2015 in Turkey will be held early parliamentary elections, which are the result of a lack of agreement on forming a new government.

Author: Jan Żuralski


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