2024 Elections: What You Need to Know

In 2024, about 4 billion people around the world will be eligible to vote in an election. This is a significant number that could have implications for the global economy, politics and markets. However, not all elections are equally important or transparent. Some countries may face challenges in ensuring free and fair elections, while others may have predictable outcomes that reduce uncertainty. 

We will focus on two of the most notable elections from 2024: the UK and the US. These are two of the largest and most influential economies in the world, and their political decisions could affect your clients' investments in various ways. We will provide a brief overview of the likely results, the main policy changes, and the potential impact on the financial markets. 

The UK election is expected to be a relatively straightforward affair. The Labour Party, led by Keir Starmer, has been enjoying a comfortable lead in the polls for over a year and a half and is widely expected to win a majority of seats in the House of Commons. The Conservative party, led by Rishi Sunak, has been struggling to regain popularity after the Brexit saga, the pandemic and several scandals. 

We tend to see elections causing volatility in the financial markets as a change in government can mean different policies; for example, privatisation vs nationalisation or the rate of corporation tax. Changes to tax, government spending and the level of borrowing ultimately influence company earnings which then leads to share price movement. So what policy can we expect to see if the opinion polls are correct?  

The main focus of the Labour Party's campaign has been on social issues, such as the NHS, housing, and 'securonomics', which is a term coined by shadow chancellor Rachel Reeves to describe her vision for strengthening economic security. Social reforms wouldn’t be expected to influence equity values to a significantly. It is the economic policies which would be expected to impact asset prices. Recently we have seen Starmer outline his six ‘first steps’. The first of these is for Labour to ‘deliver economic stability’ by implementing “strict spending rules” to foster economic growth while keeping taxes, inflation, and mortgage rates low.  

Some of his policies have been compared to those of US President Joe Biden, who also adopted a progressive agenda to address the challenges of the post-pandemic era. 

However, the fiscal headroom for the Labour Party is limited, as the UK government has already accumulated a large debt burden due to the Covid-19 crisis. The Office for Budget Responsibility (OBR) forecasts that the UK's debt-to-GDP ratio will reach 103% by 2024, which is the highest level since the 1960s.  

The impact of the UK election on the UK market is likely to be limited, for three main reasons. First, the outcome of the election is not predicted to be uncertain, and the markets have already priced in the probability of a Labour victory. Second, the UK market is not very dependent on the UK economy. Most of the companies listed on the FTSE 100 and the FTSE 250 derive a large portion of their revenues from overseas. Third, the policies represent a centrist approach. A Labour Party under previous leader Jeremy Corbyn threatened to drastically change the makeup of the UK. Under Starmer, it is not expected to change too much.  

The FTSE 100, which is the index of the largest UK companies, generates about 80% of its revenues from outside the UK. This means that the performance of the index is more influenced by global factors, such as exchange rates, commodity prices and geopolitical events than by domestic factors, such as tax rates, interest rates and growth rates. The FTSE 250, which is the index of medium-sized UK companies, has more exposure to the UK economy but still obtains about 55% of its revenues from abroad. 

Therefore, the UK market is more sensitive to the global economic outlook than to the UK political outlook. However, there may be some sectors or industries that could benefit or suffer from the Labour Party's policies, such as health care, utilities, energy and financial services, with a keen focus on the NHS and setting up ‘Great British Energy’. These sectors may experience some volatility or revaluation around the election period, depending on the market's expectations and reactions. 

The US election is scheduled for November 5 and it is expected to be a more uncertain and contentious affair. The incumbent President Joe Biden will face a rematch with his former rival Donald Trump. The differences between the two candidates are more pronounced than in the UK, and the polls are more volatile and less reliable. 

The main issues that will dominate the US election are likely to be immigration, trade, China, climate change and health care. These are areas where Biden and Trump have divergent views and policies, and where they have clashed in the past. Biden has reversed some of Trump's policies, such as rejoining the Paris Agreement on climate change, halting the construction of the border wall with Mexico and easing some trade tensions with China. However, he has also continued some of Trump's policies, such as maintaining a tough stance on China's human rights violations, imposing sanctions on Iran and supporting Israel. 

Despite their differences, the economic policies of Biden and Trump, in reality, are not too dissimilar, as both have supported fiscal stimulus, infrastructure spending and tax cuts for the middle class. There are some areas of contrast. Biden has also proposed to raise taxes on the wealthy and corporations and to expand the social safety net, such as health care, education and child care. Trump has opposed these proposals. Similar to his last term, Trump will be looking to lower taxes, loosen regulations and, in his words, “drill, baby, drill”, in order to increase domestic energy production which should help to lower domestic gas prices.  

The impact of the US election on the US capital markets is likely to be more significant than what we see in the UK, for one main reason. The outcome of the election is more uncertain, and the markets may react to the shifts in the polls and the potential disputes over the results. Similar to the UK, the US government is facing a growing pile of debt that could limit expenditure. 

The policy could also see more of a shift than that in the UK, but a lot of the change will be focussed on cultural issues and it is the economy that influences the market. From an economic standpoint, Biden’s policies have been supportive. Arguably, the level of fiscal support has caused inflation to be stickier, nonetheless, this has supported US equity markets relative to its bond market. If Biden remains in power, we can expect more of the same. If Trump re-claimed the presidency, policy would only get more supportive of the free market, just with less backing for sustainability.