As we approach the halfway point of 2024, we thought it would be useful to check out the results of this year’s record-breaking election. The numbers are particularly impressive: Around 4.2 billion people are thought to have voted this year, which represents half the world’s population and 68% of the world’s stock market capitalization.
The implications for investors are significant, with several key elections likely to shape global markets and economies over the coming months and years. At US Global Investors, we often say that government policies are a harbinger of change, and if that is the case, we may be in for some serious change.
The EU’s rightward shift
One of the most significant political developments so far this year has been the shift of the European Union (EU) to the right. Recent EU parliamentary elections have seen far-right parties make significant gains in power in many of the EU’s 27 member states.
This Conservative upsurge has been driven by growing dissatisfaction with the migration crisis, which I’ve written about before, and with regulations on climate change and other issues that are perceived to disproportionately affect rural populations. European economies have also been largely stagnant since the financial crisis, fueling dissatisfaction with the status quo.
Eight years ago, the same issue motivated British voters to approve Brexit.
The scale of the far-right’s surprising victory has drawn attention in the United States, where President Donald Trump’s approval rating continues to outpace incumbent former Vice President Joe Biden, although the gap between the two has narrowed significantly since Trump’s conviction in the Manhattan hush-money case.
PM Modi wins third term
In India, the world’s largest democracy, Prime Minister Narendra Modi was re-elected for a third consecutive term but with a smaller majority. The Bharatiya Janata Party (BJP) failed to secure the 272 seats needed to form a majority government on its own, resulting in the formation of a coalition government.
The market reacted negatively to the reduction in majority stake, with $371 billion worth of shares being sold, with foreign investors selling a record $1.4 billion worth of shares.
Despite this initial reaction, Modi’s historic reforms are expected to continue to drive economic growth. The International Monetary Fund projects India’s real gross domestic product (GDP) will grow nearly 7% this year, making it one of the world’s fastest-growing economies. The Bharatiya Janata Party is likely to push for India’s manufacturing growth in Modi’s third term, but it could have to contend with coalition allies, slowing the process.
Is Mexico becoming unfriendly to business?
Earlier this month, Mexico held its largest election in history, with more than 20,000 local, state and federal positions up for grabs. Claudia Scheinbaum, candidate for the National Renewal Movement (MORENA), won with an astounding 30% of the vote, equivalent to 38 million votes, to become Mexico’s, and North America’s, first female president.
Sheinbaum, a climate scientist and former mayor of Mexico City, is set to continue many of the policies of outgoing President Andrés Manuel López Obrador (AMLO). Unlike Modi, Sheinbaum has a supermajority in Congress, giving him a good chance to reform Mexico’s constitution, including potentially nationalizing electricity generation. This could lead to a worsening business environment and create challenges for investors in the Mexican market.
The Mexican peso has been under pressure since the election, with the exchange rate hitting its highest level in more than a year after Mr. Scheinbaum announced in September that judicial reform would be an early focus of the new Congress.
Towards November
Perhaps the most closely watched election in 2024 will be the upcoming US presidential election. Despite Trump’s conviction, Biden continues to lag behind Trump in favorability ratings, according to RealPoliticsPolling, which aggregates a variety of national and statewide polls. Most Americans cite the economy and inflation as the most important issues influencing their vote.
Yesterday, President Trump announced his plan to repeal the income tax and replace it with an all-out tariff policy. President Trump was a strong proponent of tariffs during his administration and is widely expected to use tariffs again if re-elected. However, his proposal would likely require a constitutional amendment to be implemented, which is difficult in today’s extremely partisan and divisive political climate.
At US Global Investors, we are continually monitoring these developments and providing insights and strategies, and understanding how government policies are harbingers of change will be key to making informed investment decisions for the rest of the year and beyond.
