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In the U.S., it’s normal for policy uncertainty to increase before a major election, then decrease once the results are in. In any other election cycle, the predictable increase and decrease in uncertainty offers shrewd managers unique opportunities for operating, investment, and financing decisions. Election years are the time to pursue projects that entail minimal commitments and expenditures but will produce tremendous first-mover advantage and large payoffs if post-election policy turns out to be favorable. This year, however, is different. The authors explain why and outline several considerations for company leaders planning their investment decisions.
Election years have long been characterized by increased policy uncertainty, which typically reverts to lower levels after the results become known. Opposing parties have different views on a gamut of economic policies that affect firms’ growth, risks, and profitability. This pattern of uncertainty buildup followed by its sudden post-election decline has been observed at levels across the political spectrum, including U.S. gubernatorial and presidential elections as well as major elections around the globe.
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Copyright for syndicated content belongs to the linked Source : Harvard Business – https://hbr.org/2024/07/companies-need-a-new-approach-to-investing-this-election-year