How elections impact the JSE

South Africa’s national elections have strongly influenced the performance of the JSE in the past. However, there is no pattern for investors to follow, and the elections tend not to be the biggest influence on the stock market’s performance. 

This is feedback from Debra Slabber, portfolio specialist director at Morningstar South Africa, who collected data showing the performance of the JSE All Share Index and the All Bond Index during election years going back to 1966. 

Slabber said 2024 is a big year for elections, with more than half of the world’s population heading to the polls. 

This has resulted in considerable investor uncertainty, with many afraid to commit capital without knowing the results of various elections. 

Locally, the election is just around the corner, and it could be significant. Sentiment towards the ruling party has been falling, and some polls predict that the election will see the ANC lose its majority. 

This may require the ruling party to form a coalition government for the first time since 1994. Coalitions can come with disadvantages, namely slow decision-making and instability. 

This could be a headwind for a country looking to improve its economic prospects. 

Slabber said it’s incredibly difficult to predict how these political events will pan out and even harder to predict how the market will react to them.

One clear lesson from the past is that elections don’t take place in a vacuum. Politics is one of many other variables, including macro and micro, fundamental and technical, and other factors that influence the price of assets.

If we consider the most recent US election, for example, the pandemic was a far bigger driver of markets in 2020 than the election. 

Another lesson is that initial reactions don’t always persist. The small value rallies of 2016 and 2020 eventually faded as large-cap growth stocks resumed their dominance. 

Earnings and cash flows are ultimately bigger drivers of markets in the long term than politics. 

Turning back to the local front, uncertainty over election outcomes continues to drive a weak appetite for risk assets, and investors remain sceptical amidst economic inertia. 

With that being said, investors have had to endure many uncertainties over several years, including politics. 

A weak currency, lacklustre economic growth, an unstable energy supply, deteriorating infrastructure and elevated interest rates, to name just a few. Uncertainty, volatility, and political instability are nothing new to South Africa.

Taxing and spending, policy and regulation — these are all important variables that can impact stocks, bonds, currencies, and commodities. But politics is just one of the many forces that move asset prices, Slabber said. 

The chart below shows how South African equities and bonds have fared for each calendar year when an election took place in our country. 

It is hard to draw any concrete pattern from the data. Slabber said that tells you that elections are maybe more noise than anything else.

Election year	JSE All Share	All Bond Index
1966	21%	1%
1970	-26%	-6%
1974	15%	-5%
1977	31%	14%
1981	1%	2%
1984	9%	2%
1987	-5%	15%
1989	56%	22%
1994	23%	-9%
1999	71%	30%
2004	25%	15%
2009	32%	-1%
2014	11%	10%
2019	12%	10%