
Reporting from the Helm June 2024

John Campbell
Post-Election Uncertainty
Flying out of Pietermaritzburg this morning, looking down on the snow-capped Drakensberg mountains, I couldn’t help but think about the challenges we face and the importance of the decisions that lie ahead.
For the past six months, the election has dominated our attention with a constant barrage of presentations, news stories, conversations, predictions and forecasts from many of those in the know. The long-awaited election is now over, and while there was mostly consensus that the ANC would not get a majority vote, no one predicted the meteoric rise of the MK party, with nearly half of KwaZulu-Natal voters and 15% nationally throwing their support behind the party. The coming weeks will be a tense waiting game as political players negotiate coalitions that will determine the nation’s direction.
Coalitions can come with disadvantages, such as slow decision-making and instability. This could prove to be a headwind for our country as it seeks to improve its economic prospects.
A clear lesson from the past is that elections do not occur in isolation when it comes to markets and politics. Politics intersects with various other variables, including micro and macroeconomic factors, fundamental and technical indicators, as well as foreign and domestic influences, all of which collectively impact asset prices.
Historically, it’s often said that politics and investing don’t mix. However, this isn’t because political dynamics have no impact on financial markets. Taxing and spending, policy, and regulation are all important variables that can affect stocks, bonds, currencies, and commodities. Nevertheless, politics is just one of the many forces that influence asset prices.
I have included a chart below showing how equities and bonds have fared in election years, along with the performance of the Rand in the calendar year. It is hard to draw any concrete pattern from the data. Perhaps that in itself indicates that it’s more noise than anything else.

Emotions intertwined with political beliefs present behavioural challenges, undermining the rational, cool-headed decision-making that investing demands. It’s wise to acknowledge that elections will likely increase short-term volatility, but this should not impact your long-term investment strategy or financial plan.
As with all uncertainties in the world of investing, diversification remains one of the most important and underrated strategies for dealing with a wide range of outcomes. Both Morningstar and Portfoliometrix continue to build robust portfolios for our clients that deliver on their mandate without taking binary bets on macro factors or political outcomes.
A well-designed portfolio, tailored to meet your investment goals while remaining within your risk tolerance, is a far better solution and much more likely to result in long-term investment success than trying to predict the outcomes of elections in the weeks ahead.
Please be in touch with your team at Chartered if you have any concerns you would like to discuss. Let’s hope the best decisions are made to take our country forward in a positive direction for all.
Warm regards,
John