Malcolm and the market

What a new PM means for the market

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There's been much written about our new Prime Minister, and what changes we may see under his leadership. For investors, it's natural to ask whether there are implications for the market, and what (if any) industries are most likely to see changes — for better, or for worse.

Early polls gave reason for optimism; measures of both consumer confidence and economic expectations surged in the wake of Malcolm Turnbull's ascension. In the business community, the generally accepted wisdom is that the Liberal party are more business-friendly, and that Turnbull will not only be more decisive than his predecessor, but gives the Liberals a better chance of re-election.

However opinion polls and community disposition, like market sentiment, are fickle creatures and improvements are often transitory. Over time, it will be results that determine the ultimate success of the new PM.

Challenges ahead

Turnbull faces a slowing China – with resultant declining commodity prices and waning resources employment. Our terms of trade has been moving in the wrong direction, and the outlook for global economy remains uncertain. The PM has some big challenges ahead.

At any rate, the ruminations and speculations from market commentators — interesting though they may be — are at best a distraction for true investors. They certainly should have little bearing on how one approaches the market.

Throughout our history, there has been virtually no discernible correlation between economic performance and the political leanings of the ruling party. Whether Labor or Liberal are leading 'Team Australia', it should make little difference to the broader performance of the sharemarket. There are far bigger forces at work.

It's true that the different parties currently have a different stance on things like emissions reduction, and indeed the former and current PM also have divergent views. Similarly, there may be differences in regard to healthcare, education and infrastructure spending — and these can absolutely have implications for certain sectors of the economy, and in turn the market.

Pragmatism required

Nonetheless, when facing such uncertainly the pragmatic investor shouldn't change her approach. Anyone whose investment strategy rests on correctly anticipating the changes of government and the timing and direction of policy decisions is resting on extremely spurious foundations. Further, uncertainty and risk is at the core of investing – no leader or political party can change that.

Regardless of what's happening in Canberra, it's never wise to expose yourself to companies that face meaningful regulatory risks or whose profitability depends heavily on the good grace of Government.

Even if you take the view that Government does have a material impact on the timing and severity of the economic cycle, accurately forecasting the timing and severity of cyclical swings is beyond the reach of investors.

Foolish takeaway

As economist Tim Duy said: 'As long as people have babies, capital depreciates, technology evolves, and tastes and preferences change, there is a powerful underlying impetus for growth that is almost certain to reveal itself in any reasonably well-managed economy.'

And as Australians we are very fortunate to live in a country with a robust and well-functioning democracy, where the major political parties sit close to the centre of the ideological divide. As a nation we entrepreneurial, innovative, creative, hardworking and motivated and there is ample investment opportunity for those that can look past the short term machinations of political and market changes.

I wish Malcom luck and hope he leads with wisdom and vision. But the change at the Lodge won't affect my approach to investing, and neither should it yours.

Andrew Page is a Motley Fool investment advisor. You can follow The Motley Fool on Twitter @TheMotleyFoolAu. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »