Why general elections in 2024 could lead to volatile investment markets


The last few years have seen volatile investment markets due to the pandemic, lockdowns, and fears that high inflation could lead to economic recessions. Looming general elections could mean investors continue to experience ups and downs throughout 2024.

UK prime minister Rishi Sunak is expected to call a general election at some point in 2024. Indeed, the last nationwide vote took place on 19 December 2019, so the next general election has to happen by 28 January 2025 – five years after the current parliament first met.

As of December 2023, data from Ipsos suggests Labour has a double-digit lead in opinion polls. Yet, a lot could change before Sunak calls for a general election. He is likely to consider factors like economic growth and meeting key pledges when he sets a date, in the hope of boosting the Conservative Party’s chances of staying in power.

It’s not just UK citizens that will be heading to the voting booth in 2024 either. The 60th US presidential election will take place on Tuesday 5 November 2024.

Incumbent president Joe Biden is running for re-election as a member of the Democratic Party. However, in a historic move, the Colorado Supreme Court ruled that his predecessor Donald Trump, a representative of the Republican Party, isn’t an eligible presidential candidate – a decision Trump vowed to appeal in December 2023.

Opinion polls at the end of 2023 suggest Trump is leading despite the ruling from the Supreme Court. According to the Independent, Trump was leading 46% to 44% as Biden’s approval fell to an all-time low. The 9% that said they didn’t know who they would back may sway the results.

So, why could these general elections affect your investment portfolio?

Investment markets react to uncertainty which could cause volatility

Investment markets react to a huge number of factors and speculation. During times of uncertainty, this can lead to greater volatility.

Since political parties may make pledges related to future policies, from tax cuts to spending priorities, investment values can adjust dramatically in the run-up to a general election. Factors like a narrow margin of victory might lead to even greater volatility.

Even when the ballot papers have been counted, volatility may still be present as markets react to changes the winner announces in the weeks that follow the results.

As a result, investors may see the value of their portfolio rise and fall significantly throughout 2024.

3 valuable tips to keep in mind during general election market volatility

While the year ahead might be bumpy for your investment portfolio, the best course of action for many investors is to stick to their long-term investment strategy. Here are three tips that could help you make investment decisions that are right for you.

1. Focus on your long-term goals

When the markets are falling or rising, it can be tempting to make snap decisions. You might worry about the possibility of markets falling further and consider withdrawing your money as a result.

While volatility can be nerve-racking, the ups and downs often smooth out when you take a long-term view. In fact, historically, markets have recovered from periods of volatility or downturn to deliver returns over a longer time frame.

Of course, returns cannot be guaranteed and it’s important you consider what level of investment risk is right for you when creating a strategy.

Focusing on your reason for investing could reduce your worries about market volatility.

2. Try to tune out the investment noise

Over the coming year, it’s going to be almost impossible to avoid hearing news about the general elections and the effect they have on the market.

You might read that markets have “plummeted” following the latest opinion poll or “rallied” once a date has been set for the UK general election. As difficult as it is, try to tune out this noise – it could lead to you making impulsive investment decisions that aren’t right for you.

3. Speak to your financial planner

If you have questions about what market volatility means for your financial plan or are considering making changes to your investment portfolio, we could help.

Having someone to talk to could put your mind at ease and help you focus on long-term objectives rather than short-term market movements.

Please contact us to talk about your investment portfolio and how it fits into your wider financial plan.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.