Other sectors that can be significantly affected by political change include healthcare – in the US at least. Democrats tend to try to squeeze drug prices, which wins votes from seniors; Republicans tend to be against 'Obamacare', which can trouble the health insurers who manage that system.
Again, share prices generally move protectively ahead of elections anticipating political change – indeed most often moving further than the eventual change justifies.
In the UK, as all political parties boast about their aim to spend more, there are no investment implications from the UK election.
Lastly, defence spending is a government matter. Oddly, if Donald Trump were elected later this year, that would be likely to provide a strong boost to European defence spending, but make little difference to US spending, as confidence among European leaders and nations that the US would ride to rescue in times of peril would be shaken.
What is perhaps most significant is that the largest sector in global equities, technology in particular, is hardly mentioned in elections.
Maybe this is yet another factor in the ascendancy of technology investing; stocks like Nvidia and Apple are little affected by hard-to-predict factors such as the economic cycle, or inflation or even changes of political regime.
Regulation may be an issue for some of those stocks, but both the likelihood and the impact of such regulatory changes can be hard to predict, and it may also be the case that changes at the political level may not actually alter the regulatory outlook.
Should we pay less attention to elections?
Although the bulk of political change affects only a small part of the index, politics still needs to be monitored.
Some would argue that the underperformance of UK equities in recent years is down to Brexit. Some would argue that the strong performance of UK equities in the 1980s was due to Margaret Thatcher. I would argue that valuations and inflation were a greater influence than politics in both examples.
Looking forward, we now have three major elections coming up. The UK election seems likely to result in a Labour government, partly because their economic policies are very similar to those of the outgoing government.
Their plans for greater state involvement in renewable energy may already have led to private capital retreating – notably there being no bids for last year’s UK offshore wind auction.
If there are any investment implications of an incoming Labour regime, the market has surely discounted them already – the result would not be a shock and therefore markets have had ample time to digest the implications, if any.
The surprise French election seems to be an attempt by Emmanuel Macron to make parliament function again. Macron has not had a majority in the National Assembly for the past two years and this has made his presidency appear a lame duck.
