The nation will be focused on headlines that Prime Minister Scott Morrison has officially called for the federal election on May 18, and that's likely to drown out other news.
That could be a factor that's like to weigh on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index this morning with the SPI futures pointing to a 0.2% drop in the market despite a positive lead from Wall Street overnight.
Prime Minister Morrison (or ScoMo as he likes to be called) went to see the Governor General this morning as the government is put into caretaker mode – a convention to prevent the sitting government from passing laws or doing deals that would bind the next government (whoever that might be).
Labor tipped for a big win
Right now, the odds are pointing strongly in favour of Labor with the Australian Financial Review quoting Sportsbet's odds of a Labor Government at $1.16 versus the LNP at $4.85 to win. No surprises there given the track record of the Coalition!
This could be why the futures market is pointing to a weak start for the ASX as investors have more to fear from a Labor win given the policies they are promising to enact if they take office in five weeks.
Stocks linked to the housing market might feel pressure from Labor leader Bill Shorten's plan to limit negative gearing with some experts predicting the change will put further pressure on the slumping property market.
Labor win means investors lose
This won't bode well for the REA Group Limited (ASX: REA) share price and CSR Limited (ASX: CSR) share price as both companies are already under strain.
ASX investors (particularly income investors) will also be at the losing end as Shorten will ban cash refunds of franking credits to most. This will dampen the appeal of high yield stocks, including the big banks like Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd. (ASX: NAB), which are also pressured by the property market.
Discretionary retail stocks are another likely group to face a Labor headwind – particularly those aimed at middle to high income households. This is because Labor is against ScoMo's plans to flatten the tax rate for this group of taxpayers to a flat 30%.
If anything, Labor wants to increase taxes to higher income earners and reintroduce the budget repair levy until FY23. Given the slowdown in the Australian economy, this isn't the time to be discouraging consumers from shutting their wallets.
I am not passing judgement on who would make a better prime minister for the country overall, but it's clear that one group will be less favourable for ASX investors.
