Elections set to shape markets in 2014
Global markets will be buffeted by electoral politics in 2014 as some of the most important economies in the world prepare for critical elections in which the outcome will shape the next phase of the global recovery. Furthermore, tensions are rising between countries across Asia, the Middle East and Europe threatening critical trade routes and heightening the risk of miscalculation leading to conflict.
These are the key findings from a report released recently by political risk research and advisory firm Political Monitor arguing politics is one of the big trends that will shape markets in 2014. Key points from the Global political outlook – 2014 report include:
• United States: mid-term elections and the battle for the soul of the Republican Party will see politics triumph over policy and signal the beginning of the end for the Obama presidency. Markets should prepare for ‘decision avoidance’ as politics takes charge.
• Asia: the absence of a robust regional security structure threatens a further escalation in tensions over disputed islands in the East and South China Seas as the key protagonists continue their arms race. Meanwhile, both China and Japan will be consumed by respective domestic reform agenda while India and Indonesia will prepare to elect a leadership for the next five years.
• Middle East: the shifting balance of power in oil markets will unsettle established relationships in the Middle East and put the region on the path to conflict as America’s attention drifts toward Asia. OPEC will become a forum of discontent as the Gulf States argue over the implications of the return of Iranian oil to the world market.
• Europe: right wing parties are on the rise leading into EU elections as high unemployment and austerity have caused a fissure between the electorate and the political elite. To the east Russia will continue its efforts to resist further European encroachment into its traditional sphere of influence.
• Latin America: governments’ will have to determine whether they have the appetite to implement the reforms necessary to attract foreign capital or slide into economic nationalism that restricts their ability to reach their full potential. Political Monitor partner Damian Karmelich believes markets should prepare for ongoing volatility as political events dictate the outcome of the next phase of the global recovery.
It’s a reminder for markets that the political cycle never rests.