Votes in 2012 could change the investment landscape.
2012 will be a year of elections. April will see parliamentary elections in the eurozone's black sheep, Greece, coinciding with presidential elections in France, which has been Germany's greatest ally in plans to reform the region's economic management. The outcome in either could profoundly change the future of the eurozone.
And before the US elections are held in November two of the BRICs, Russia and China, will have elected new leaders. While there can be little doubt about the result in either of those countries, it's reason to be bearish on one and bullish on the other.
It does now look as if Greece will hold parliamentary elections in April, despite the German finance minister's bid to delay the poll as a condition of this week's bailout package. That would have kept the technocratic government, imposed under EU pressure last year, in place to implement the package's austerity measures.
Instead, the eurozone will rely on a commitment by the leaders of the main parties to implement the package if elected. In addition, there will be strong safeguards in the form of a permanent EU/IMF monitors and an escrow account to prioritise debt repayments.
The man expected to be Greece's next prime minister, Antonis Samaras of the conservative New Democracy, signed up to the austerity package somewhat reluctantly with the proviso that "policy modifications might be required".
New Democracy's standing in the polls has faltered, dropping below 30% over the past 12 months. But, over the same period, that of PASOK -- the incumbent socialist majority -- has plummeted from 37% to 10%.
So will Greeks go and vote for the same harsh economic policies on offer from both main parties? Will they rebel, essentially making the elections a referendum on euro membership? Or will politicians find weasel words to satisfy both audiences: electorate and EU paymaster?
Key factors may be the timing of the elections and events in France. It seems New Democracy want them held before Greek Orthodox Easter on 15 April, but PASOK want them after Easter. That puts them very close to the first round of French presidential elections on 20 April. The outcome there might influence Greece.
That's because, in France, incumbent president Nicolas Sarkozy could well lose to the Socialist candidate Francois Hollande. Hollande is currently leading the polls with 31% against Sarkozy's 26%, with right wing Jean-Marie Le Pen on 15%. Hollande has criticised the austerity package imposed on Greece and called for greater eurozone assistance. He vowed to rip up the EU 'treaty-that-isn't-a-treaty', which sets out fiscal disciplines for the region.
Domestically, he has declared "the world of finance" to be his number one enemy, and his policies embrace programmes for job creation and lowering of the retirement age. Not surprising, then, that Angela Merkel has publically backed Sarkozy.
The two highest candidates in the first round go into a final round on 6 May. Europe might look very different then. A socialist French premier and recalcitrant Greek parliament could spell the break-up of the eurozone. An emboldened 'Merkozy' and compliant Greek parliament would mean business as usual, but more so.
Unlike in France, there's little doubt who will win the Russian presidential elections next month. Officially, Vladimir Putin is running at 50% in the polls, with the communists at 17%, nationalists at 10%, and a late-entrant oligarch Mikhail Prokhorov at 7%.
Some analysts think Prokhorov's candidature is sponsored by the Kremlin, to draw fire from the protest movement that arose after December's parliamentary elections were widely claimed to have been rigged. The last oligarch to have a tilt at the presidency, Mikhail Khordokovsky, is still languishing in a Siberian gaol on charges of tax evasion.
Though the result may be a foregone conclusion, those demonstrations are significant. Some think that Putin, restored to the Presidency after a term as prime minister, will crack down hard on dissent. The reformers believe that an unstoppable movement has been created. December's demonstrators were young and educated, not the disenfranchised communist babushkas of earlier street protests. That could mean further protests.
And that makes me moderately bearish on Russia, for the time being. Economic policies won't change, but political turmoil would be bad for investment and the stock exchange.
When the Chinese Communist party holds its 18th Nation Congress in October, the first since 2007, there's little doubt who will be elected the new General Secretary. But this will represent a handover of power to a new generation, and so China's slow and managed process of change is set to continue, even if the direction of change, at least in the social sphere, is less clear.
In the near term, there is evidence to suggest that Chinese governments boost economic growth in election years. It's a similar principle to the presidential cycle theory that says the US stock market is weakest in the first two years of a president's term and strongest in the last two. So I'm somewhat bullish on China.
Unfortunately for President Obama, a hostile Republican House of Representatives stymies any hope he might have of boosting the economy ahead of November's elections. But recent economic indicators have, in any case, been moderately positive.
Even more helpful to Obama's cause is the failure of the Republican Party to coalesce around a candidate. With Santorum and Romney neck and neck in the ever-changing polls, and Gingrich pledged to stay in the race, the Republican candidate may not have time to assemble a credible challenge to the incumbent. The Economist/You Gov poll puts Obama ahead whoever he runs against.
A Republican president would be harsher on government spending, keener to cut taxes and more protectionist. But whoever is in the White House, perhaps the start of a new term signifies a greater effort to deal with America's debt mountain. That could see some European-like austerity cuts in the US. And so the presidential cycle might indeed be played out on the stock market this time around.
You can also hear David Kuo and Fool analyst Morgan Housel discuss the US election in more detail on the Money Talk podcast.
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