2024 will go down in history as a period marked by intense political change and geopolitical turbulence. From a global election supercycle that influenced fiscal and trade policies to ongoing geopolitical conflicts that disrupted markets, the world experienced a profound reshaping of wealth creation strategies.
The Global Election Supercycle of 2024
Several influential democracies, representing a significant share of global GDP, went to the election booths in 2024. Investors closely monitored the outcomes, as political transitions often signal shifts in fiscal policy, market regulations, and investor sentiment. Key elections across the United States, India, Brazil, and the United Kingdom captured global attention.
United States Presidential Election
The 2024 U.S. Presidential Election emerged as a critical inflection point for global markets, with corporate tax reform, green energy investments, and U.S.-China relations dominating policy debates. The election's outcome signaled potential shifts in fiscal policy, trade strategy, and regulatory frameworks.
Market Implications
- Investors were caught in bouts of volatility as markets reacted to potential policy changes regarding corporate taxes and capital gains taxes.
- Tech and green energy stocks saw swings in valuation, as both presidential candidates had opposing views on the future of renewable energy.
- The dollar experienced fluctuations, affecting forex reserves in countries like India and Brazil, while safe-haven assets, such as gold and U.S. treasuries, witnessed inflows.
India’s General Election
The 2024 Indian General Election, the world’s largest democratic exercise, became a pivotal event for both domestic and foreign investors. Debates on fiscal deficit control, economic growth, and startup policy reforms set the tone for market sentiment, with the outcome holding the potential to trigger sectoral and macroeconomic shifts.
Market Implications
- Indian equities experienced a surge in volatility in the months leading up to the election, as Foreign Institutional Investors (FIIs) adopted a wait-and-watch approach.
- The election outcome had a direct impact on sectors like infrastructure, renewable energy, and fintech, all of which were aligned with electoral promises.
- Real estate investments in Tier-2 and Tier-3 cities rose in anticipation of regional development initiatives promised during the campaign.
- The rupee saw fluctuations, with depreciation concerns tied to potential policy changes on foreign direct investment (FDI) limits.
Other Noteworthy Elections
- Brazil’s Presidential Election: Brazil’s 2024 Presidential Election became a crucial driver of global commodity markets, with key debates centered around commodity exports, rainforest conservation, and social welfare policies. As one of the world’s largest exporters of agricultural products, iron ore, and crude oil, Brazil’s election outcome had significant implications for global supply chains.
- United Kingdom’s General Election: The United Kingdom’s 2024 General Election unfolded at a critical moment for the post-Brexit economy, with debates revolving around trade deals, inflation, and the domestic energy crisis. Economic uncertainty ran high as investors assessed the likely trajectory of the UK’s fiscal and monetary policies under new leadership. Investors moved towards safe-haven assets, such as gold and treasuries, as uncertainty loomed large.
- Mexico: Key debates on energy privatization affected global energy investors.
- Indonesia: Indonesia's General Election was centered on mineral export bans, which had a ripple effect on the EV battery market and nickel exports, impacting global metal prices.
- South Africa: South Africa's General Election impacted the mining industry and gold production, influencing global commodity markets.
A Year of Geopolitical Turbulence
Along with electoral battles, the escalation of wars and regional conflicts created volatility, which had a direct impact on investment strategies, commodity prices, and wealth allocation decisions.
Israel-Palestine War
Economic Implications
- Energy Prices: With Israel’s role in natural gas exports, the conflict led to global price surges, increasing energy import costs for India.
- Safe-Haven Demand: Investors shifted to safe-haven assets, with gold surpassing $2,100/ounce.
- Defense Stocks: Defense companies, like Rafael and Lockheed Martin, saw valuation increases as nations ramped up defense budgets.
- Indian Perspective: India’s defense sector faced procurement delays, leading to adjustments in defense technology sourcing strategies.
Russia-Ukraine Conflict (Year 3)
The Russia-Ukraine conflict entered its third year in 2024, evolving from a high-impact geopolitical event to a protracted stalemate with far-reaching economic repercussions. While the initial shock of the conflict had subsided, its enduring nature continued to weigh heavily on global commodity markets, energy prices, and investor sentiment. The conflict's nature reinforced the importance of geopolitical risk monitoring, with wealth advisors advocating for diversified portfolios and a heightened focus on inflation hedges, multi-currency strategies, and exposure to defensive sectors.
Economic Implications
- Commodity Supply Shocks: Disruptions in wheat and oil exports drove up global food inflation, affecting India’s import bills.
- Currency Volatility: The collapse of the Russian ruble hurt emerging market forex portfolios.
- Energy Dependence:India’s energy import bills rose due to LNG price surges, leading to reevaluations of India’s energy security strategy.
- Cybersecurity Investments: Cyber-warfare led to increased interest in cybersecurity startups, driving private equity inflows into Indian tech firms.
China-Taiwan Tensions
Renewed tensions between China and Taiwan in 2024 reignited fears of global supply chain disruptions, with the semiconductor industry emerging as the most vulnerable sector. Given Taiwan's critical role as a global leader in semiconductor manufacturing, particularly through firms like TSMC, the prospect of conflict sent shockwaves through technology markets. Wealth advisors played a critical role in helping clients manage this geopolitical risk, focusing on sectoral diversification, currency hedging, and proactive exposure to domestic semiconductor opportunities.
Economic Implications
- Semiconductor Supply Volatility: Disruptions affected TSMC’s valuations, while India’s efforts to bolster semiconductor production gained traction.
- "Make in India" Investments: Institutional investors focused on India’s semiconductor strategy, including support for initiatives like the Vedanta-Foxconn semiconductor plant.
- Tech Industry Volatility: Portfolio managers rebalanced tech sector exposure, with an eye on Indian tech manufacturers and semiconductor suppliers.
The Road Ahead: Preparing for 2025 and Beyond
The twin forces of elections and wars have permanently altered the landscape of wealth creation. From tax policy changes driven by election outcomes to the asset-class impact of war-driven commodity price spikes, the financial world of 2024 required sharper foresight and a more dynamic approach to portfolio construction.
