Elec­tions set to shape mar­kets in 2014

Business First - - NEWS -

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.

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