The biggest global election year in history will hit growth stocks and the world economy, JPMorgan says




Filip De Mott
Sat, January 13, 2024 at 2:30 PM MST·3 min read



JPMorgan said 2024 is the biggest global election year in history with some of the most populous countries holding votes.


Strategists warned that the results would eventually be negative for the global economy and growth stocks.


A victory by Trump could have broader macro implications via executive orders that dismantle many of Biden's policies.

JPMorgan said 2024 is the biggest global election year in history as some of the most populous countries hold votes, with major implications for the economy and stocks.

Election results may see four trends — polarization, populism, democratic deterioration, and geo-economic fragmentation — continue to be felt, strategists said in a note Wednesday.

"Many elections will likely be a close call, with some countries recognizing that populists do not deliver and others still in thralled with them, but overall, we think these four horsemen are unlikely to fade and thus think the 2024 elections bonanza will eventually turn out as negative for global growth, depressing Growth stocks vs Value," they wrote. "We do not think they will bring back the old days of zero or negative real yields given steadily rising deficits and debt loads."

Populist regimes typically promote massive policy changes, which tend to pressure up inflation in the short run, according to the note. They also mean more borrowing and restricted trade, a downside force on global growth.

Of all the elections, JPMorgan expects the US race to carry the most weight, with President Joe Biden likely facing off again against former President Donald Trump.

"We see the US elections as being more consequential and meriting hedging more so than any other election, as a Trump victory could have broader macro implications, including through a series of executive orders that would dismantle or reverse many of Biden's policies," the note said.

Among the anticipated Trump policies is the imposition of a universal 10% tariff, expected to ignite trade wars across the board. If introduced, this could push the dollar 4%-6% up in exchange markets. At risk of sliding would be the Chinese yuan, euro, and Mexican peso.

Uncertainty over the US and other global elections will also generate a higher VIX, made worse by a potential recession. In US election years, JPMorgan strategists found that S&P 500 volatility stands 2 points above non-election years.

"Hence, investors looking to position themselves for election uncertainty and the return of populism should position for higher risk premia and higher market volatility," the note said.

In addition to populism, JPMorgan said another key theme to watch this election year is the continued erosion of "democracy metrics," which have consequences for markets.

The bank cited surveys from Freedom House and other independent watchdogs that show a decline in democracy and global freedom has been a trend for 17 years.

"Weaker governance creates higher volatility and lower multiples, and we find that, after a democracy downgrade, equity returns have, on average, been 5% lower over a 10yr period than in countries that were upgraded," JPMorgan said.