While many may wish to see Obama alley oop* his way to another four years in power, the uncertainty surrounding the upcoming election no doubt influences the way markets and end investors perceive the US. And the same goes for other countries facing possible changes in leadership.
The recent re-instatement of Vladimir Putin as Russian president was just the first in number of high profile elections across major markets this year, most notably in France where Nicolas Sarkozy is currently on his campaign trail.
Further afield, regional polls have just taken place in India, while across Asia elections are also due in the likes of Korea and Malaysia. And let’s not forget China, where election may be a dirty word but its ‘transition’ of power from one leader to another will dominate news flow in the latter part of this year.
This all of course comes after a momentous 12 months of forced regime change covering events in Tunisia, Egypt and the Arab Spring.
Jobs on the line
For equity investors, and especially commodity traders, 2012 has been a relatively profitable year thus far. But with many of the world leaders’ jobs on the line, the assumption should be that any unpopular fiscal policies will be kept shelved for the time being at least.
“In China, there is huge emphasis not to rock the boat before the transition that begins in October and concludes in March next year,” remarks Eric Stein, manager of Eaton Vance’s Global Macro Fund.
“The US economy does look like it is beginning to gain some momentum, but what could derail this? Europe falling off a cliff could, which in the eyes of the current US administration might ruin Obama’s re-election chances.
“If you are in a present administration you always want the economy to do well, but in particular during an election year when voters form their opinion three or six months before the polls – that’s when you want the economy to be peaking from a partisan political standpoint.”
Many a market forecaster has had his/her career ruined by making bold predictions on timing economic peaks and troughs, and only a fool would assume that markets will, ahem, dribble their way through an unabated upward path for the remainder of the year without some kind of hiccup.
* An offensive play in which a player throws the ball up near the basket to a teammate (or, more rarely, to himself) who jumps, catches the ball in mid air and immediately scores a basket, usually with a slam dunk.
