Politics and policy can have a significant impact on markets and investments.
Political decisions shape fiscal policy, which can in turn shape an economy and financial markets. Specifically, the policies of the government of the day will be driven by the ideology of the governing party and can impact taxes, industrial relations and regulation, as well as the broader economy.
Why politics and policy matters to investors
Political events or changes in policy and legislation can alter a company’s strategy and earnings, so investors need to keep up to date with political news and policy news to determine how changes may affect their shareholdings. Examples of this include changes to tax structure or regulatory requirements which could impact costs for a company and affect its ability to pass on those costs.
Policy changes may also impact the inflows and outflows of foreign capital as foreign investors react to policy news and determine if the changes present opportunity or risk. For equity markets, shares may react to perceived political risk or a significant change in policy brought on by a change in government.
Political risk can also influence fixed income markets as it may present problems for corporate bonds and government bonds. Increased risk can push bond yields higher as investors demand higher returns as compensation.
Times of uncertainty can amplify politics and policy news in the minds of investors. This has been particularly evident in recent times during the coronavirus pandemic as governments around the world and in Australia, at state and federal level, responded to the crisis with specific policies.
Governments have embarked on massive spending programs to help stimulate economies. Fiscal policy news has dominated headlines and influences financial markets. Investors, therefore, have had to stay up to date by accessing the latest politics news. It’s also prudent to keep abreast of new or amended legislation that may impact the share price of companies you consider.
Politics and policy on ausbiz
Assessing risk can be extremely worthwhile for investors and portfolio managers in determining asset allocation, and that’s why it’s important to stay up to date with the latest politics news and policy news. The ausbiz team regularly interviews policy-makers, and speaks with analysts and industry groups to gauge their reaction to politics news and policy changes.
At ausbiz we make sense of all the jargon, and break down what it means for investment strategy.
Don’t play catch-up. Sign-up to ausbiz or download the app for news about politics and policy, and insights into how it may impact your investment ideas. Brought to you by the experts, free, live and on demand.
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