Will the elections affect the market?

The South African electorate has been voting in the government for the next five years. There has been a lot of talk about whether the expected next President of the Republic, Jacob Zuma, will be a good or bad choice if the ANC is re-elected, which is widely expected. In South Africa we vote for a party not an individual, which means that the party with the most votes gets to appoint the President. The results are not yet in, but it looks likely that the ANC will win. So what will the effects of the election be on the market?

• Risk is already priced in
• Rand not expected to be affected
• Market could respond positively

The best thing you can do is go on as usual and plan a budget.

These are the opinions of various commentators in the financial papers.

Fin24 looked at the factors in the market that may come in to play due to the election. Historically the market rallies and goes up after the elections before returning to the fundamental underlying levels it should be at. This means we may get a market bonus for a few months before the effects of the credit crunch start weighing the market down again. An economist interviewed in the article said ' we could be pleasantly surprised with the performance of the market after the election'.

Business Report had a look at the Rand and its current weakness and their interviewed experts were of the opinion that the weakness of the Rand at the moment was not related to the elections and they further said 'We can't, in fact, see the result having much influence'. Politicsweb noted that Trevor Manuel is expected to stay on after the election and this should go some way to quieting any jitters that may be felt as the new administration comes in. The article noted that as the votes started to be counted and results were slowly being published the Rand was generally steady.

No change after elections

The national elections are due soon, but we can expect no change, at least in terms of economic policy.

The Guv, Tito Mboweni, of the South African Reserve Bank was speaking in Johannesburg recently and basically stated that the would be no economic policy change after the elections.

iAfrica carried this quote from him 'Whatever party wins the election we will have to confront the reality that there will be no room for manoeuvre'.

He was referring to the world wide economic problems which have considerably narrowed the scope of what can be done with the late capital model in a globalised world.

The Guv was not feeling optimistic, but then neither is George Soros. Soros famous for crashing out whole currencies, is not figuring on the crisis ending anytime soon.

The Guv said 'We're in this for another four to five years at least'.

The Guv and Uncle Trev, the Finance Minister, have a disagreement as to whether we will see a recession here in South Africa or not.

Mboweni would not be surprised if there was another quarter of negative growth which would signal a technical recession not quite the full blown depressions being predicted overseas but a period of contraction.

The Times published a story outlining their differences. What was also noted is the Minister is a politician, and well the elections are coming up and politicians are in the habit of saying what ever needs to be said in the run up to an election.

After all an election is nothing more than a five year job contract, so say whatever you need to say to get the contract and then relax safe in the fact that you can't lose your job regardless of what the reality after the election is and whether it matches what you said and predicted and promised before the election.

The new data that will call the truth will come out on the 26th of May.

Safely after the election.

Politics is after all, all about timing.

The Times article interviewed some economists who were in general on the side of Mboweni believing that things would still get worse before they got better.

Fin24 also commented on this story reporting Mboweni's comments about who ever gets in after the election that there would be no real room for them to move and that policy would essentially stay the same.

The fact is we are not totally decoupled from the global economy but the knock on effects are taking longer to hit us, so we will feel the pain, just less of it and for less long.

Now is the time to get a decent savings account and ride out the storm. Don't forget to register with Justmoney to get all of our updates.