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Federal Election: How it will impact the sharemarket

A composite image of Anthony Albanese, the ASX board showing company price changes and Scott Morrison to indicate the effect the federal election may have on the stock market.
The federal election may have am impact on the share market. (Source: Getty)

Australians are heading to the polls this weekend to vote for who they wish to govern the country in the federal election.

But is there an outcome that would be better, or worse, for your investments?

Well, in the 11 elections held since 1990, the All Ordinaries Index climbed by an average of 1.2 per cent in the 15 trading days after poll date, according to CommSec research.

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Likewise, in the 15 trading days after federal election poll dates, the Aussie dollar, on average, rose by 1.3 per cent.

In eight of the 11 federal elections held since 1990, the Aussie rose in the 15 trading days after poll date.

“We have taken a look in the rear-view mirror and analysed the impact that every federal election since 1990 has had on the sharemarket [All Ordinaries Index] and the Aussie dollar,” CommSec associate equity market analyst Divik Nigam said.

Since 1990, Australia has held 11 federal elections. Out of those 11 elections, the Australian Labor Party (ALP) won four: 1990, 1993, 2007 and 2010.

The Coalition Liberal National Party (LNP) won the remaining seven elections: 1996, 1998, 2001, 2004, 2013, 2016 and 2019.

The impact on the sharemarket

In federal elections won by the ALP, the All Ordinaries index fell by an average of 0.4 per cent in the 15 days prior to the election, and climbed by an average of 0.6 per cent in the 15 days after the election, Nigam said.

But in federal elections won by the Coalition, the All Ordinaries Index averaged a 1 per cent rally in the 15 days leading up to the election, and averaged a 1.5 per cent climb in the 15 days after the election.

“In elections held since 1990, on the trading day after the poll date, on average, the All Ordinaries Index ticked 0.3 per cent higher,” Nigam said.

“When the LNP won, the index delivered a 0.5 per cent increase, but when Labor won, the index finished flat on average.”

However, as with most things in finance, past performance is not indicative of future results, Nigam warned.

“Clearly the background to every federal election is different, and the current federal election is occurring during a time when there is a lot of uncertainty,” he said.

“Global markets have been very volatile and have experienced broad-based losses in recent weeks.”

The uncertainty this election time stems from the current economic conditions, with unemployment at a record low, inflation at a 21-year high and wages continuing to stagnant.

“Inflationary pressures are coming from all sides, including staff shortages,” Nigam said.

“Individuals are demanding higher wages in response to the rising cost of living and many businesses are facing both demand and supply issues as a result.

“Both wages growth and staff shortages are key discussion points in the current election.”

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