How Are Market Analysts Eyeing The Impact Of Election Over Equity Market?

How Are Market Analysts Eyeing The Impact Of Election Over Equity Market?

As per the media report, it is expected that the Federal Election will take place in mid of May 2019. With the upcoming election, volatility around the market is a natural phenomenon. A general reaction across the investors is to remain cautious and decelerate any investment decision after the election results. Let’s see how the markets behaved before and after the federal election months.

During the Federal Election in March 1983, where the Australian Labour Party were victorious. In the eight weeks up to the election “All Ordinaries” index fell by 0.6%, whereas the index rose by 19.8% after the three months of the election.

In the Federal Election in December 1984, the Australian Labour Party were elected to powers. The index reported zero return for eight weeks up to the elections, whereas it rose by 5.4% after the three months of the elections.

The index returns were positive before and after the election in July 1987, where the Australian Labour Party regained power. The index rose by 3.7% for eight weeks before elections, and 15.9% after the three months of the elections.

The market responded negatively before and after the election in March 1990, where the Australian Labour Party was again elected to power. The index fell by 7% for eight weeks before elections, and 3.5% for three months after the elections.

In the election of March 1993, ALP again came to power. The market gained 9% and 3.2% for eight weeks prior to the elections and three months after the elections, respectively.

Coalition Government dethroned ALP in the election of March 1996, and the market responded by reporting a negative return of 2% after the three months of the election, however, eight weeks prior to the election, the market rose by 2.3%. In the subsequent elections in October 1998, November 2001, and October 2004, Coalition Government remained in power. The market responded positively eight weeks prior to the election and three months after the election.

In November 2007, ALP came back to power. The market responded positively three months after the election (11.7%). Prior to the elections, for eight weeks, the market fell by 2.9%. ALP regained the power in August 2010, and the market responded positively prior eight weeks and after three months of the election.

In September 2013, Coalition Government won the elections, and the market responded negatively by shedding 1% after the three months of the election.

Coalition Government retained the power in the election in July 2016. The market responded positively by 4.04% after the three months of the election, whereas in the prior eight weeks of the election, the market declined marginally by 0.11%.

As per the media reports, the mixed reaction is coming over the results of the Federal Election in May 2019. Given the ideological differences between both the political parties, where the Labour Party focuses on “Fairness” and “Inequality” and Coalition Party stands for “Liberalism”, it is difficult to say which party will come to power. However, opinion polls conducted by several media houses give a marginal edge to the Australian Labour Party. Past data shows that the market has responded positively in the appointment of either of the government after the election results. Existing investors should not worry about uncertainty. New investors can benefit from the current market volatilities with the help of cost averaging, where he/she may collect more shares when the market is down to make short to medium term returns.


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