How has ASX reacted to previous Australian elections?

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How has ASX reacted to previous Australian elections?

How has ASX reacted to previous Australian elections?
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Highlights

  • The 2022 Australian federal election is scheduled on 21 May 2022.

  • These elections would decide the fate of the incumbent government led by PM Scott Morrison.

  • The ASX All Ordinaries index is down nearly 6% so far this year.

This weekend, Australians are all set to vote in the upcoming federal election. The 2022 Australian federal election, scheduled on 21 May 2022, would elect members of the 47th Parliament of Australia. It would also decide the fate of the incumbent Liberal–National Coalition government, led by Prime Minister Scott Morrison, who is eyeing a fourth consecutive term in office.

In this context, the election results would not only be tracked by political pundits but also investors and stock market analysts as it would lay down a road for future investments and taxation. In addition, the election is widely expected to be a vote on the existing government’s decisions during the COVID-19 pandemic. Investors have always been known to look beyond the slogans and promises made during election campaigns.

What has happened so far?

Australia has held 14 federal elections since 1983. Of these 14 elections, the Australian Labor Party (ALP) won seven polls in 1983, 1984, 1987, 1990, 1993, 2007 and 2010. On the other hand, Coalition Liberal National Party (LNP) won in 1996, 1998, 2001, 2004, 2013, 2016 and 2019.

How has the ASX All Ordinaries performed in the run-up to federal elections?

The Australian stock market has performed on a reasonable note in the past elections since 1983. We would here look at how ASX All Ordinaries, which is considered a total market barometer for the Australian stock market, has performed in previous elections.

What we observed was that the index fared well on an average both in the run-up to and after the polls. The average return during the five-week election campaign in the lead-up to election day has been 1.7% in the past 14 elections.

Similarly, the average return for the three months after the election day stands at 4.4%.

Now, we would look at how the stock market reacted post the Labor Party and Coalition victories. The ASX All Ordinaries plunged 0.4% on an average in the 15 days before the election day when the Labor Party emerged victorious. However, it climbed 0.6% on an average in the 15 days post-election.

On the other hand, the index rose 1% on an average in the 15 days leading up to the big day in case of Coalition’s victory. The index averages 1.5% rise in the 15 days after election.

Every election is contested on different issues

While we have a measure of the broad stock market performance for every election since 1983, nothing can be generalised. Every election is fought on different issues and the stock market is expected to behave differently each time.

As of now, there is a lot of uncertainty in the Australian market. The ASX All Ordinaries index is down nearly 6% so far this year on account of concerns arising out of interest rate hikes, rising inflation, and stagnant wages.  Even staff shortage has been a critical issue in the current election.

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