There are lots of elections around the world this year and it’s beginning to feel that once over one hurdle, the next one’s looming all too soon. Some may liken the competition to a three-legged race with ailing parties and politicians tied to each other for dear life, desperately trying to stave off so-called ‘populist’ upstarts. The fact is: the status quo engineered by elites no longer cuts the mustard.
The German election took place in September last year, but it wasn’t until Sunday that Angela Merkel knew that the SPD, with a change at the very top, was willing to enter a ‘grand coalition’ with her CDU party; nothing grand about this desperate attempt at forming an unpopular government as both managed their poorest showing since World War 2. Now the real opposition party is the Alternative für Deutschland, with 12.6 per cent of the vote (and rising in opinion polls). Add to this the potential banning of diesel engines from German cities and President Trump’s ideas on steel tariffs, and one shouldn’t be surprised that the leading Dax index of top 30 shares has struggled. This quarter’s sell-off is serious, but as yet not deadly while the 11200 level holds.
Italy’s election on Sunday repeated what is becoming a recurring theme, centre-right and centre-left support imploding and new parties scooping votes from disaffected nationals on an anti-corruption platform. Seeing as this will be the country’s 66th government since 1946, with the biggest budget deficit to GDP in the EU (flattered by the fact an estimated 20 per cent black market share is included in their calculations), rising unemployment, and an economy still below where it was in 2007, the picture’s not rosy. Milan’s MIB index has been capped at 24000 since 2009, less than half the record high in March 2000. The route of least resistance is south, although not necessarily at speed.
The first round of Russia’s presidential election takes place on 18 March and President Putin should manage re-election with the mandatory absolute majority. Stretching from Chukotka Autonomous Okrug in the east (closest to the US) over 11 time zones, it’s the world’s biggest country with 143m people, three-quarters of them living west of the Ural Mountains, in Europe. In January, the main Micex index reached a new record high, but stumbled to form a large dragonfly doji monthly candle. Finding its footing quickly this month, we expect it to power on to new highs on a regular basis this year. Inflation has been tamed from about 15 per cent since 2000 to a current 2.2 per cent, the key interest rate has been slashed from a peak at 17 per cent in 2015 to 7.5 per cent today.
Over in the Americas Mexico holds a general election on 1 July, mired in North American Free Trade Agreement (Nafta) negotiations and trouble with President Trump. Investors in the Bolsa Mexicana de Valores’ main index of large, liquid stocks worry that the current PRI party’s (in power from 1929 to 2000) incumbent Peña Nieto might lose out to left-leaning López Obrador, who could renationalise the oil industry. From a record high in August, the index has consolidated in a neat triangle above the 46000 level (which acted as resistance since 2012) and should now provide support. The currency has recovered from its weakest point in 2017, but the long-term outlook is for bouts of weakness.
