“It promises to be a nervous week for global markets as traders mull over the relative performances of the US presidential candidates. With no clear favourite, the US stock market is unlikely to find any clear direction until the winner is named.”
Does that sound familiar? That line from an article by the Reuters news agency was carried in newspapers around the world. Last week? Last month? No. In fact, that article is from September, 1988 and was about the Bush-Dukakis debates of that year.
This isn’t to imply that every campaign is the same, but it does serve as a reminder that markets regularly navigate political uncertainty.
Of course, the US is not the only country holding national elections or referendums this year.
Here in the United Kingdom, voters are due on June 23 to cast a ballot in a referendum on whether Britain stays in the 28-member European Union. The UK conservative government has warned voters of a possible recession should they opt for a “Brexit”.
What do these events mean for equity markets, for government bonds, for commodities and for currencies? Those kinds of questions get a real workout at these times in the financial media, which inevitably finds a wide divergence of opinion from market observers.
So while we have responsibilities as citizens to take an interest in elections, it is by no means clear that these events have long-term implications for our decisions as investors.
That is much more a matter of our own personal goals and risk appetites, our investment horizons, the structure of our portfolios, our degree of diversification and the costs we pay.