Navigating 2024 Elections - What To Look Out For!

The year 2024 is poised to become a landmark moment in history, with over 2 billion people worldwide preparing to cast their votes in elections spanning countries like the US, India, the European Union, Mexico, and South Africa, as highlighted by the World Economic Forum.

This unprecedented level of global electoral engagement holds significant implications for investors. Politics and elections exert a profound influence over financial markets, moulding investor sentiment and market dynamics. Grasping the intricate interplay between these factors and investments is paramount for safeguarding and could contribute to optimizing portfolio value.

Impact on Domestic Currencies:

Elections and political events swiftly reverberate through domestic currencies. The uncertainty surrounding election outcomes or shifts in political power often triggers volatility in currency markets. Investors contend with fluctuations in their domestic currency's value, directly impacting the purchasing power of their investments and potentially yielding gains or losses.

Key Considerations for Investors:

In periods of heightened political activity, investors must remain vigilant and consider various factors:

• Policy Changes: Elections usher in promises of policy reforms or shifts in economic direction. Assessing how proposed policies might affect different sectors and industries within the economy is essential.
• Regulatory Environment: Changes in government leadership can precipitate shifts in regulations affecting specific industries. Anticipating regulatory trends and potential changes is pivotal for adjusting investment strategies accordingly.
• Market Sentiment: Political uncertainty often fuels market volatility as investors respond to news and speculation. Monitoring market sentiment and investor behaviour offers insights into short-term market movements.

Additionally, the upcoming elections occur amid a surge in Artificial Intelligence (AI) and social media usage, potentially altering election dynamics, voter behaviour, and campaign strategies. Monitoring how these technological advancements may shape election outcomes and impact market sentiment may benefit investors. Vigilance regarding AI regulation, social media policies, and their influence on electoral processes is vital for investors navigating the intersection of politics and technology.

Offsetting Volatility Through Offshore Investments:

Investors seeking to mitigate the impact of domestic political events have the option to explore offshore investment opportunities. Diversifying into foreign markets and currencies could provide resilience against domestic economic conditions. Offshore investments have the potential to serve as a buffer against potential losses or volatility stemming from local political events.

Facilitating Offshore Investments on One Platform:

Like the saying “where there are cents, rands can be made,” EasyEquities offers investors convenient avenues for accessing offshore markets and currencies with no minimum investment. The EasyFX option allows the transfer of funds between local and offshore accounts, offering opportunities to invest in offshore companies (from markets such as the Americas, Europe, Australia, and Britain) and Exchange-Traded Funds (ETFs). This feature empowers investors to seize global opportunities while effectively managing currency risks.

Moreover, investing offshore also provides an opportunity to earn dividends in offshore currencies, bolstering passive income potential for investors.

Exchange-Traded Notes (ETNs):

Investors can also access offshore currencies through Exchange-Traded Notes (ETNs). ETNs are debt instruments that can expose investors to special kinds of assets such as commodities, currencies, shares, and more. A currency ETN exposes investors to currency movements, hedging against domestic currency risk, and portfolio diversification. It may offer opportunities for earning interest or capital appreciation based on the underlying currency's performance.

ABSA offers three NewWave exchange-traded notes available on EasyEquities:

• NewWave USD: Provides investors with Dollar investments, with each note equaling $1 and accruing interest daily at SOFR (Secured Overnight Financing Rate) minus 0.10%. 
• NewWave EUR: Allows Euro investments, with each note equaling €1 and accruing interest daily at ESTR (Euro Short-Term Rate) minus 0.10%.
•  NewWave GBP: Offers exposure to Great British Pounds, with each note equaling £1 and accruing interest daily at SONIA (Sterling Overnight Indexed Average Rate) minus 0.20%. 

Interest, if accrued, will be paid every six months. Here’s the latest distribution for February.

Bond Market Considerations:

During elections, bond markets can experience heightened volatility due to uncertainty surrounding future economic policies. Factors such as changes in government spending or taxation policies can sway investor sentiment, leading to fluctuations in bond prices and yields. South African government bonds, including those with specific maturities, are accessible on EasyEquities and exclusively available in the EasyEquities Tax-Free Savings Account, where dividends and interest earned are tax-free.

Conclusion

In today's interconnected world, politics and elections wield significant influence over investment outcomes. By remaining informed, diversifying portfolios, and leveraging ETNs and offshore assets like shares, investors can navigate political uncertainties and capitalize on global opportunities with confidence. Remember, informed decision-making remains pivotal for successful investing, especially amid political flux.

The year 2024 is poised to become a landmark moment in history, with over 2 billion people worldwide preparing to cast their votes in elections spanning countries like the US, India, the European Union, Mexico, and South Africa, as highlighted by the World Economic Forum.

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