December 29, 2020
Investing: How elections matter

There are three things we should never discuss around the dinner table: money, politics and religion. Ironically, the three things we normally always talk about around the dinner table…

There are three things we should never discuss around the dinner table: money, politics and religion. Ironically, the three things we normally always talk about around the dinner table… are money, politics and religion!

One reason for this is because they’re all connected, and they’re all HEAVILY influenced by you, me and everyone that we talk to, work with and interact with on a daily basis. The markets, politics and religion all give us a sense of belonging, purpose and stories to share. These are three of the four fundamentals that give us meaning - so… we’re likely to talk about them at any chance we get.

Depending on the crowd we’re with, our conversations will be dominated either by academics or opinions or perhaps a balance of the two. When it comes to elections (both in our country and others), the situation is the same too - so when you’re next around a dinner table, here are two crazy academic points that you can contribute to the conversation.

MARKETS - LOCAL AND OFFSHORE

The most obvious sentiment when it comes to elections is around confidence in the leadership. This confidence (or lack thereof) will directly influence investor confidence. This can be both local and offshore - if we don’t like what our leaders are doing, we are less likely to invest in local business (markets) and more likely to look at a heavier offshore weighting. The same too would apply to those who are sitting outside our country - and determine whether money is pumping in, or out, of our economy.

Administrative policies play an equally important role here as new administrations often like to shake up policies of previous administrations. These affect everything from the support offered to businesses at every level, living standards of the workforce, education and health for their families and the taxes we will pay for goods, services and investments.

This all leads to a more immediate impact - and that is the strengthening or weakening of the currency. Our buying power goes up and down accordingly - and once-again circles back to how much we can afford to invest in our local economy.

TRADE RELATIONSHIPS

Elections in other countries can also heavily influence what happens in our market as we have significant trade relationships with them. In his book, 21 Lessons for the 21st Century, Yuval Harari reminds us that all our communities are so intrinsically connected through trade-relationships that it’s hard to stand for any cause or initiative without indirectly supporting the opposition.

The clothes we wear, food we eat, cars we drive, technology we use and the social media platforms that we communicate with and stay in touch on are all manufactured, harvested, designed and maintained using intricate global networks.

A trade relationship that affects the parts that my car company needs to import could mean that my car takes longer to service, and will cost me significantly more than before. The food I used to enjoy from my local grocer could also become less readily available and attract a premium for import duties when it is available.

Elections matter - not only our own but other countries’ too. The next time your dinner party runs wildly away with passionate opinionistas, you can throw in the above nuggets and sound like an investment guru!

Liron Mazor

Greengrass Wealth Management is an authorised and licensed independent financial services provider with the Financial Services Board (FSP Number: 19308)
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