Politics, growth and inflation

In the last two decades New Zealand election years have been non-events for investors. Normally we would say that important secular trends and company fundamentals over-ride an election year impact on equities.

Statistically since 1987 there is has been no real evidence of an election year effect. On average the equity return of the New Zealand market has roughly matched that of global equities in election years, returning -1.8%, compared to -3.3% for global markets. In non-election years returns are also roughly the same on average (see Figure 1).

Using this data some commentators may conclude that election years have been bad years for equity returns, but the global bear markets of 1987 and 2008 heavily influence the averages. Our take is that there has been little sustained statistical historical influence of elections on the equity market since 1987.

Figure 1:  Election years have not impacted relative equity returns

Source: Harbour and Bloomberg