National victory may lead to positive capital returns of 1.5pc, report suggests

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1 year Ago

National victory may lead to positive capital returns of 1.5pc, report suggests

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The Pulse of NZ Business report has suggested a National election victory may result in positive capital return in the market.
Photo: 123RF

Businesses are cautious in the run-up to the election, although a large proportion wants a change of government.

A report, The Pulse of NZ Business, by investment firm Forsyth Barr has suggested a National victory may result in positive capital return in the market, as opposed to a Labour win, based on historical information.

“Looking at the New Zealand market performance back through history to 1957, on average there have been positive capital returns of +1.5 percent in the three months following a National-led victory,” Forsyth Barr investment strategist and report author Zoe Wallis said.

“When Labour wins, capital returns over the following three months have averaged -3.3 percent.”

The report said annualised returns tended to favour a National-led government across the whole three-year cycle with average capital returns of about 8 percent compared with a gain of about 2 percent under Labour.

However, Wallis said it was important to note the timing of Labour’s government terms had coincided with some key adverse market events in history, including the 1987 market crash, the bursting of the dot-com bubble in 2000, and the first half of the 2007-2008 global financial crisis (GFC).

However, when it came to the broader economy, the report found there was no discernible effect on the overall economy regardless of which party had won.

“Analysing GDP growth before and after elections in New Zealand reveals little significant variance based on the outcome,” she said.

“Other factors, such as the global economy, timing within the business cycle, and interest rates, tend to carry more weight.

“Unfortunately, for whoever wins this October they will be facing several tough headwinds from the current economic climate.”