2024 is the largest electoral year in global history.
According to statistics, more than 50 countries and regions around the world will stage election dramas this year, among which major powers such as the United States and Russia will have elections that touch people's nerves. This year's elections in various countries will cover nearly half of the world's population, making it expected to be the year with the most elections and the widest population coverage in history.
JPMorgan Chase wrote in a recent report that as we enter this "election year," it is expected that elections in multiple countries will have a significant impact on the economy and stock markets. The global economy is expected to face downward pressure, and the stock market may show more volatility.
Global economic growth under pressure
In addition to the general elections held by the United States and Russia in November and March this year, the new European Parliament elections will also be held from June 6th to 9th. British Prime Minister Richie Sunak recently revealed that his plan is to hold elections in the second half of this year. In addition, multiple countries such as Mexico, Indonesia, and South Africa will also hold elections this year.
JPMorgan Chase strategists wrote in their report that there may continue to be four trends in global election results - polarization, populism, deteriorating democracy, and geopolitical fragmentation.
They wrote:
"Many elections may be evenly contested. Some countries recognize that populists are unable to achieve their goals, while others remain fascinated by populists. However, overall, we believe that these trends are unlikely to change, so we believe that the 2024 election frenzy will ultimately have a negative impact on global growth, driving down the performance of growth stocks relative to value stocks."
The report states that populist regimes often push for large-scale policy reforms, which often drive up inflation in the short term. They also mean more borrowing and trade restrictions, which are a downward force for global economic growth.
The US election has the greatest impact
Among all the elections, JPMorgan expects the US general election to be the most important. From the current poll results, it is highly likely that there will be another showdown between Biden and Trump in this year's US election.
The report states:
"We believe that compared to any other election, the impact of the US general election is greater and more worth hedging against, as Trump's victory may have broader macro impacts, including the cancellation or reversal of many Biden's policies through a series of executive orders."
One of Trump's expected policies is to impose a 10% universal tariff, which is expected to trigger a comprehensive trade war. If implemented, this may push the US dollar up by 4% -6% in the foreign exchange market. The risks of depreciation will be faced by the Chinese yuan, euro, and Mexican peso.
The uncertainty of the US and other global elections will also lead to an increase in volatility indices, and potential economic recession will further worsen the situation. JPMorgan Chase strategists have found that the volatility of the S&P 500 index is two points higher in election years than in non election years in the United States.
&Amp; Quota; Therefore, investors who hope to prepare their positions for election uncertainty and a resurgence of populism should prepare their positions for higher risk premiums and higher market volatility; Quota; The report states that.
The deterioration of democracy will lead to a decrease in stock market returns
In addition to populism, JPMorgan Chase stated that another key theme worth paying attention to this year's election year is& Quota; Democracy indicators; Quota; The continuous erosion will also have an impact on the market.
JPMorgan Chase cited the survey results of independent oversight agencies such as Freedom House, stating that the decline of global democracy and freedom has become a trend in the past 17 years.
JPMorgan Chase said, "Weak governance has resulted in higher volatility and lower P/E ratios. We have found that after the downgrade of the democratic indicator, the average stock return over the past 10 years is 5% lower than in countries where this indicator has been upgraded."