How to prepare for market volatility ahead of elections?

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Highlights

  • Manifestos framed by political parties have significant impact on stock markets. If parties talk about economic growth and slashing taxes, the market may rise.
  • In debates and manifestos, whichever industries the parties talk about is likely to boom.
  • Patience, emergency funds, in-depth knowledge of current political scenarios and diversification help in times of market volatility.

In Australia, the federal elections are set to take place on May 21. There are just a few days left to know whether Scott Morrison will continue as the Prime Minister or Anthony Albanese will take up the seat. As history tells us, pre-election and post-election times are highly volatile for the share markets. 

How do elections affect markets?

Like other domestic and global factors, elections impact the stock market. For instance, if the current government wins, chances are higher for the market to go up as consistency in government shows political stability.

Secondly, the manifesto framed by parties has a significant impact on the stock market. If the parties talk about economic growth and slashing taxes, the market may rise. Additionally, the government's ideology plays a crucial role in market volatility. For instance, if a party that supports extensive economic growth wins in exit polls (the mock polls conducted before elections), the stock market rises instantly.


 


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