Major elections and markets

As our clients and employees consider how to exercise their votes in the UK election on July 4, we look at the impact elections elsewhere are having.

| 7 min read

It is a year of elections. They often capture the news headlines as they occur, and their results can produce changes in government and policy that matter to markets.

We have just seen the victory of Claudia Sheinbaum as the new President of Mexico. As expected, Narendra Modi remains as Prime Minister of India but, following the loss of seats for his own party, he now relies on the votes of coalition partners to secure a majority. We hear of the formation of a new Dutch government seven months after the big change in representation in the Dutch Parliament brought about by the November 2023 general election. We await the European elections this month and the US Presidential election in November.


The outgoing President remained popular but had to retire under a term limitation law. His nominated successor Claudia Sheinbaum, of the Morene party duly won a comfortable victory with 59% of the vote against 28% for the second placed candidate. Policy will stay similar with the accent on poverty alleviation by state programmes.

The stock market sold off on worries that, as Morena has won a large majority in the Senate and Chamber of Deputies with their coalition allies, then the new President will be able to go further with large state-led spending programmes and interventions in economic life. The election was marred by murders of candidates and excessive violence by the criminal gangs that disrupt parts of Mexican life.

The new President has promised more measures to tackle the lawlessness. She will have to deal with an increasingly agitated US over the issue of high rates of migration across the US border from Mexico. US President Joe Biden is taking independent action to return illegal migrants, with candidate Donald Trump threatening even tougher action.


We have been with other forecasters in expecting a Modi win and expecting markets to be relaxed about that outcome. Markets rose on the possibility of a big win for Mr Modi and are now reconsidering on confirmation that his own BJP party has lost 63 seats and needs coalition partners to give it the majority.

The National Democratic Alliance won 292 seats compared to the 272 needed for a majority, but the BJP party only has 240 seats in its own name. It remains likely that Mr Modi will stay as Prime Minister – and this will be broadly seen as helpful to business and growth. Mr Modi has stated he continues and has promised to persevere with pro-business and investment policies. A stronger Opposition will be able to exert more pressure against the Hindu nationalist features of Mr Modi’s government that are more divisive.

Some voters objected to the apparent triumphalism of Mr Modi claiming his alliance could win 400 seats, and with the signs of the government making it difficult for political opponents and critical journalists. The election is unlikely to change the general case for investment in India as a fast-growing large economy, nor will it change the generally expensive rating of the market.

The Netherlands

The Dutch November 2023 election gave us an early preview of trends in European Union politics towards parties that want to pursue a more nationalist and anti-migrant agenda. It has taken seven months to find a new Prime Minister. Four right-of-centre parties have formed a coalition and agreed much tougher migration policies. They have now appointed a senior official of previous Dutch governments, Dick Schoof, as Prime Minister given his past experience in handling border and internal security affairs.

The governing coalition comprises Geert Wilder’s PVV party, the Conservative VVD party, the farmers party BBB and the New Social Contract party. The last two parties are recent and have attracted voters put off by the outgoing government that went too far with its net zero policies and allowed in many migrants amongst other issues. These changes to government will result in policy changes and create more tensions between the Netherlands and the EU. The new government wants to cut taxes on working people, make it more difficult for migrant workers, reverse EU decarbonisation plans for agriculture and take a more assertive stance against new EU measures.

The European elections

This June’s elections to the European Parliament are expected to bring an increase in the number of Eurosceptic, nationalist and anti-migrant MEPs to the European Parliament, but not enough to be a majority. Current polling puts the two largest mainstream pro-EU groupings, the European Peoples Party and The Socialists, on 171 seats and 142 seats. The parties need 361 seats to secure a majority. It means these two groupings would need to reach an agreement on who to have as President of the Commission and get support from other pro-EU groupings such as the Renew Europe Liberal grouping to win the vote.

The left, with a possible 142 Socialist seats, 41 Green seats and 32 Left bloc seats, would be well short of a majority. So would the centre right even if they were able to overcome their strong objections to some members of the Identity and Democracy grouping of right-wing parties and include them in an alliance.

The US presidential election

This race between two elderly candidates with relatively low personal ratings remains too close to call. Trump’s modest lead has been eroded by the court verdict against him though some polls still show him very narrowly ahead. A Trump or Biden Presidency will have an impact on markets. They differ on taxation, on the size of the state, on whether to take net zero seriously and over what to do about wars in Europe and the Middle East. We are watching the exchanges closely and preparing plans for either outcome. Markets do need to take note of who is in the White House as the incumbent can exert influence way beyond US shores, as well as changing domestic economic and budget policy.

A Trump Presidency would be different to a Biden one.

Continuity of policy is likely to emerge in India and Mexico. The European Parliament, with a possible shift to the right, is likely to stick with people and policies already in place as they try to bargain their way to majorities to secure a new Commission. It will be difficult for a likely shift to the right by voters to be reflected in EU policy, as the mood is more Eurosceptic and hostile to free movement. A Trump Presidency would be different to a Biden one over energy, taxation and overseas engagement, as we saw in his previous term.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

Major elections and markets

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