Macro commentary by eToro analyst for Romania, Bogdan Maioreanu

Elections effects on the financial markets

2024 is an important election year worldwide. And the first elections already happened in Taiwan where vice-president Lai Ching-te of the ruling, pro-independence Democratic Progressive Party (DPP) won the presidential race, much to China’s displeasure. But the year is bringing elections in some 76 countries, with an anticipated unprecedented voter turnout. More than four billion citizens, an all-time record, are preparing to express their will, representing an impressive 40% of the world's population, 60% of global GDP and 80% of global capitalisation.

In Romania, 2024 will bring 5 rounds of elections. Since the inception of the Bucharest Stock Exchange in 1997 we witnessed 5 presidential and 6 legislative election years. Starting with the  2008 elections, the legislative and presidential elections separated because the presidential

`mandate was increased to 5 years while the MP one remained at 4 years. Out of the 9 election years, 7 were positive while 2 were negative for the BET index. The two negative years were 2008 with the global crisis when the BET index dropped over 70% and 2020, bearing the influence of the global pandemic, with the  index dropping almost 2%.  The best year was 2004 with an increase of over 101%. On average the BET increased by almost 20% in the election years, 12% in the years with legislative elections and by over 45% in the years with presidential elections.

In Europe, the upcoming European Parliament elections in June will take place against a backdrop of growing popularity of national right-wingers, creating pressure for a reorientation of political weight both in the European Parliament and, indirectly, in the European Commission. The weight of rate increases, the incidence of perceived high inflation and the effects of internal conflicts are difficult to justify against a background of growing dissent. Political elections, however, are unlikely to move significantly the European stock markets.

However, it is in November that international investors will be most focused, with US voters electing their next president, as well as the entire House of Representatives and a third of the Senate. Stock markets are not looking so much at political colour as they are at avoiding uncertainty and political gridlock. In past years, the S&P 500 index has performed more positively than negatively in the US election year. There have been 24 elections since the S&P500 index inception in 1928. In these election years, 20 of the 24 years (83%) have delivered positive stock exchange performance. When a Democrat was in office and a new Democrat was elected, the total return for the year averaged 12%. When a Democrat was in office and a Republican was elected, the total return for the year averaged 13%.

In the current environment, it is essential not to overlook the geopolitical uncertainties weighing on global dynamics. The situation in Ukraine, with the risk of an escalation, and the growing tensions in the Middle East, with the continuation of the tensions over Taiwan have the potential to deliver surprises in the markets. Despite this, over 92% of the Romanian investors are expecting to have a profitable 2024 according to the latest eToro Retail Investor Beat survey, with 46% expecting returns over 15%.

The information provided by KomuniK