In the past two years, the developed countries have seen several elections. In 2016, all investors were talking of the U.S. election which came after the Brexit vote.
This year, we saw an embarrassing election in the United Kingdom which Theresa May called to improve her powers during the Brexit negotiations. Instead of winning the majority, she lost, leaving her political powers at risk.
In September, Germans went to the election and while Merkel won, her party lost the majority. Today, her party is negotiating with the SPD for a coalition failure to which, another election will be called.
In terms of elections, 2018 may be a slow year with investors watching for the U.S. mid-term elections which will happen in November. Presently, Republicans hold both houses. They will be fighting to increase their majority.
After the win in Alabama, democrats expect to win the blue state and also scoop a few deep red states like Iowa, Utah, and Alabama.
A win by democrats could mean a tough period for Trump who needs Republicans to pass his agenda. To some extent, it could mean potential impeachment which may lead to a tough period in the markets. A good way to see the impact of a Trump impeachment is what happened two weeks ago when markets tanked after report emerged that he had asked Flynn to talk to Russians during the campaign.
Other important elections that will happen in 2018 are in Russia where Putin is expected to win again, in Italy, and in Brazil.
In South Africa, the ANC delegates passed the leadership baton to Cyril Ramaphosa. As the chair of the party, some are asking him to fire Zuma who faces several corruption cases. Such a move would lead to an election in 2018. If it doesn’t, an election in the country will happen in 2019 as scheduled. It is however unlikely for Zuma to complete his term.
Investors will continue to watch out for the developments in UK and Germany as coalition talks continue in the latter.
In Europe, a year without major political activities may mean more developments economically. In the past two years, Europe has been very active politically which has led to negative implications. For example, in 2015, the focus was on Grexit which was followed by Brexit in 2016 and elections in 2018.
Politically, the Mueller investigation will continue. Already, three of Trump’s closest allies are cooperating which could mean serious implications for Trump. Observers have noted that Flynn has pleaded guilty for a minor issue of lying to the FBI while Manafort and Papadopoulos has pleaded guilty for a minor offense. This could mean that Mueller is using them to reach to a higher person. Those mentioned so far are Jared Kushner and Donald Trump Junior.
All these political developments in the U.S could mean a less vibrant economy as we saw in 2017. It may also mean a much lower dollar.
The Brazilian election will be very significant for one of the leading emerging markets countries. The election could be a competition between Former President Luiz Inácio Lula da Silva and right-wing congressman Jair Bolsonaro. This election could mean more volatility for the Brazilian Real.