Last year more people voted than in any previous year in history. There were national elections in over 70 countries including India and Indonesia1, the geopolitical lynchpins of Taiwan and South Korea and Western powers like Japan, France, the UK and, of course, the USA.
“The graveyard of the incumbents”
In 2024, the people spoke. And while they debated their politics in multiple different languages, many said the same thing: “More of the same? No thanks.”
Financial Times data columnist John Burn-Murdoch dubbed 2024, “the graveyard of the incumbents”2. Writing just after President Trump’s triumph, Burn-Murdoch noted that incumbents in every one of the 10 major countries that held national elections in 2024 took a kicking from voters. “This is the first time this has ever happened in almost 120 years of records,” he wrote.
According to Burn-Murdoch, wallet-stripping inflation and anger about immigration during a cost-of-living crisis were the key causes of voter resentment. In countries big and small, that resentment sprung some electoral surprises.
India’s ruling BJP was targeting 400 seats but ended up with 240. Botswana’s Democratic Party has held power since independence in 1966 but lost all but four of its seats in 2024. In the US, President Trump increased his vote among women and lifted his share of the black male vote by 25%.3
Over 640 million people voted in India's 2024 election
As investors, it makes sense to analyse the electoral events of 2024 to see what longer-run resonances they have for the economies and companies we invest in. In this article we’ll look at the different regions individually, but as you’ll see, in a globalised economy, policy decisions made in one region often affect the others.
The United States: Trump 2.0 and a four-letter word
The markets leapt on the election of President Trump – even before his inauguration – in the belief his administration would be more pro-business, that tax cuts would be extended and that Republican policies would bring down the price of energy.
While Elon Musk's Department of Government Efficiency (DOGE) is in the headlines for its target of two trillion dollars in government cost cuts, a broader deregulation agenda could boost the US economy during Mr Trump’s second presidency.
“There are businesses that could benefit significantly from skilful deregulation,” says Nik Dvornak, Portfolio Manager of the Platinum International Brands Fund. “Since the GFC, compliance has become a large and growing cost for US financial services companies. Cutting regulation there could generate cost savings that make a material difference to customers – and to profitability.
There’s also been a feeling that the Biden administration was holding back merger and acquisition deals in the technology sector – for example when some big tech companies were trying to move into the lucrative payments space. We might see more action in 2025 if President Trump follows through on his laissez-faire instincts.”
D.E.B.T.
Towards the end of 2024, a number of Platinum analysts were in the US4. They found a general sense of optimism but also noted a slowing in the US industrial sector, a view validated by the Fed’s late-2024 rate cuts.
Its increasingly obvious that investors – and the US Fed – will now have to navigate concerns that President Trump’s policies (including new or higher tariffs) will add to inflation in 2025. That combination may explain Fed Chair Jerome Powell’s decision to cut rates slightly in late December but then note in his accompanying commentary that inflation would be higher than previously expected in 2025.
“The Fed is trying to square a circle,” says Platinum Co-CIO Andrew Clifford. “We were seeing overall growth start to slow and that would normally induce a faster rate-cutting response. But there are still inflation pressures in the economy and they might be exacerbated by some of President Trump's policies. That means interest rates could stay higher for longer. With the US sharemarket boom so concentrated in a small number of stocks, higher-than expected rates could be one factor that derails the US market.”
Looming over all the talk about the US economy in 2025 is a four-letter word hardly uttered during the long election campaign – debt. Given the vast scale of the US debt – and no specific plans to cut it - there’s a chance that at some point in President Trump’s term global investors will seek higher interest rates to lend to the US.
As former Treasury Secretary, Larry Summers recently said – “that's the non-resiliency in the American economy that troubles me most and leaves me wondering for just how long the world's greatest debtor can remain the world's greatest power”.5
Europe: how the mighty have fallen
As we enter 2025, the two biggest economies in the European Union, France and Germany, are dealing with political and economic strains. France has had five Prime Ministers in three years. Germany is going to the polls seven months earlier than expected.
Europe’s big two economies faced the ultimate embarrassment when an Economist article ranked OECD economies on a combination of GDP growth, debt, employment, market performance and inflation. Former basket-states Italy, Spain and Greece ranked in the top five. France and Germany languished in the 20s. 6
While Europe tries to manage cost of living and immigration concerns amongst voters, it’s also plagued by excess spending, high debt and weak productivity. The European Commission has tasked former ECB President and former Italian Prime Minister, Mario Draghi, with revitalising EU competitiveness.
Launching his report, Mr Draghi said, “World trade is slowing, geopolitics is fracturing and technological change is accelerating. It is a world where long-established business models are being challenged and where some key economic dependencies are suddenly turning into geopolitical vulnerabilities. Of all the major economies, Europe is the most exposed to these shifts.”7
Mario Draghi’s prescription for these ills includes more unified European capital markets, cheaper energy, closing the innovation gap with the US and China, a focus on human capital and higher defence spending.
There are signs that European governments are moving towards more pro-business policies. Adrian Cotiga, Portfolio Manager for Platinum’s European strategies says,” It might surprise some people, but the new Labour government in the UK looks serious about cutting the red and green tape that stifles new housing developments. This could help the UK homebuilders in the Platinum European Fund like Barratt, Persimmon and Taylor Wimpey.”
Japanese elections and US factories
In 2024, Japan endured its own year of political turmoil with a slush fund scandal, an early election and the eventual formation of a minority government led by a weakened LDP.8 Despite what was, by Japanese standards, a tumultuous year, the main Japanese stockmarket index was still up nearly 20% in 2024, amongst slow but continuing steps to make Japanese companies more profit and shareholder oriented.
In late 2024 Platinum invested in Fanuc, a Japanese factory automation business. FANUC is a one of the world’s leading providers of factory automation products such as robotics and machine tools.
While Fanuc is a Japanese business, its footprint is global and the case for buying the stock is linked to policy development in the United States. “The Trump/Republican victory will likely lock in increased spending on factory automation in the US,” says Leon Rapp, Portfolio Manager of the Platinum Japan Fund.
“We have seen strong growth in factory construction in the US in recent years spurred by the new industrial policies such as the Inflation Reduction Act and CHIPs Acts. We expect companies to continue ‘reshoring’ manufacturing production from countries such as China,” says Leon. “However investment in factory automation lagged as companies waited for more regulatory clarity before committing much larger amounts of capex. They now have that clarity and we expect automation equipment spending to increase sharply, leading to rising orders and better margins at Fanuc.”
China – not much voting, plenty of politics
China’s ‘elections’ don’t fit the Western mould – candidates are appointed or approved by the CCP - but there’s no doubt public opinion has an influence on policy. In 2024, as China’s economy continued to struggle, pressure from below was one of the factors that drove two major stimulus packages. Whilst they failed to completely re-energise the ailing Chinese economy and its crippled property markets, they were sees as positives.
“We expect to see more ammunition thrown at their economic problems in 2025”, says Cameron Robertson, Platinum’s Portfolio Manager for Asian Strategies. “The big questions are around the focus and the timing. Many argue government spending that helps consumer into the shops and the property market is the key to reaccelerating growth. As for timing, it’s likely the Politburo will unleash their next stimulus package only after the shape of President Trump’s China policies are clear.”
Political volatility does not always mean market weakness.
o The US Presidential election cost $15 billion in campaign spending, saw one President withdraw his candidacy and the eventual winner survive two assassination attempts. The S&P500 was up over 20% for the year.
o Germany’s economy slumped and Volkswagen sought to close a German plant for the first time ever. By year’s end the country was under a caretaker government – but the DAX was up nearly 19%.
o Argentina elected a libertarian government unlike any ever seen in South America. Anarcho-capitalist President Millei sacked thousands of workers, froze infrastructure spending and swore to close multiple government departments. While controversial, these measures helped arrest Argentina’s runaway inflation The Argentina Merval index ended the year up 170%.
Market Data: Factset, local currencies at 31 December 2024
The limits of political prediction
As the stats above indicate, it’s hard to predict market reactions to political or geopolitical events. We live in a world where the decisions of individual governments, no matter how powerful, can be washed away by larger global trends.
The unpredictability of modern politics, exemplified by the travails of incumbents in 2024, is another reminder that investment markets work amidst a complex weft and weave of competing forces and that ‘understanding the politics’ alone is never enough. Focusing on individual companies and ensuring you pay a fair price for a share of their profits can be a better path to solid longer-term returns.
1 Indonesia’s election saw 170 million votes cast with turnout over 80%.
2 See https://www.ft.com/content/e8ac09ea-c300-4249-af7d-109003afb893
3 For more on a year of electoral turmoil see https://quillette.com/2024/12/09/the-year-of-elections-democracy/
4 For more on these company visits see: https://www.platinum.com.au/the-journal/what-the-factory-floor-tells-us-about-us-markets
5 From: Implications of a new US foreign economic policy: A conversation with Lawrence Summers and Robert Zoellick, 10 December 2024, Peterson Institute for International Economics
6 Which economy did best in 2024?, The Economist, 10 December 2024
7 Presentation of the report on the Future of European competitiveness, European Parliament, 17 September 2024
8 The LDP has been in power in Japan for all but 4 years since its founding in 1955