Investing in anticipation of political events is always very tricky.
The outcomes are uncertain and binary (i.e. a winner and a loser).
If you want to profit from investing in an election you have to:
Predict the outcome correctly.
Anticipate what other people would have predicted – most people might be wrong.
- Predict how investment markets will react.
This is nearly impossible, as we saw with Brexit and the US election of Donald Trump.
Most people did not anticipate Trump would win, yet markets reacted positively.
What are the three or four most likely outcomes to an election?
For example - December's ANC elective conference:
Nkosazana Dlamini Zuma wins: Markets will be negative, ratings agencies will be negative, politics divided. Long-term markets might anticipate a new governing coalition in 2019 which could be positive.
Cyril Ramaphosa wins: Markets positive, sentiment is positive. Long term questions will be asked about compromises made to win the election.
- A neutral candidate wins: Markets will need to understand the candidate, will wait to see his new Cabinet and watch speeches very carefully for signs of things to come.
Currently, South Africa might be in a better position than 12 months ago.
Much of the rot is being exposed and, hopefully, stalled.
International firms (e.g. KPMG, McKinsey, Bell Pottinger) are being held accountable.
Should we be doing anything to “prepare ourselves”?
Should we send money offshore as a balancing factor to some negative scenarios?
Watch the exchange rate carefully at R13.50, said Ingram.
For more detail; listen to the interview in the audio below (and/or scroll down for quotes from it).
The JSE will jump very quickly if the good guys win.— Warren Ingram, Galileo Capital Financial Advisor
South African property companies… there’s been so much bad news… they’re offering attractive yields… it would be silly to avoid that…— Warren Ingram, Galileo Capital Financial Advisor
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