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Client Update - 7th June 2024

While general etiquette may suggest avoiding conversations about religion, money, and politics, given the events of this past week, we cannot avoid discussing the latter in this email. As we approach the midpoint of 2024, a year often referred to as 'the year of elections’, with over 60 countries holding elections, we are starting to see significant political developments. In the last week alone, we have seen Mexico elect Claudia Sheinbaum as its first-ever female president, South Africa’s ANC lose support and India experience an unexpected outcome.


In South Africa, the ruling African National Congress (ANC) experienced a significant loss in support, losing its parliamentary majority for the first time since the end of apartheid 30 years ago. This outcome was widely anticipated as a result of widespread dissatisfaction with issues such as corruption, economic inequality, and the energy crisis. Despite the outcome being in line with expectations, when the results confirmed that the ANC would need to form a coalition with one or more other parties to govern, the market reacted negatively. The country’s currency, stocks and bonds fell sharply as the situation raised concerns about potential political volatility and uncertainty over economic and fiscal policy in Africa's most industrialised nation​.


In India PM Narendra Modi has narrowly won a third consecutive term in a much tighter general election than anticipated. While the result in South Africa was largely in line with polls, the same cannot be said for the Indian election. More than 640 million people voted in a marathon seven-week election, hailed as a "world record" by election authorities, but the results were a personal blow to Modi who had expected to secure a majority having dominated the country’s politics for a decade now. The unexpected result led to significant market volatility. The Sensex and Nifty indices experienced fluctuations as investors reacted to the political uncertainty and its potential impact on future economic policies. The Indian Rupee also faced pressure, reflecting concerns about the country's economic direction and investor sentiment​. However, this quickly reversed with Indian shares jumping 3% on Wednesday in a broad-based recovery after two key allies pledged their support to form a new government.


In contrast, Mexico's ruling party won by a landslide, defying expectations. Initially, this news caused a significant drop in the stock market due to the uncertainty surrounding the new political landscape. However, investor confidence soon recovered, leading to a rally in Mexican stocks and a strengthening Peso as the market adjusted to the anticipated political stability and continued economic policies under the current administration​.


Closer to home, the first debate between Prime Minister Rishi Sunak and Sir Keir Starmer took place on Tuesday night as they kicked off their election campaigns for the upcoming general election on the 4th July. Despite polls indicating a likely Labour victory this summer, suggestions were that Sunak, the Conservative underdog, came off the stronger of the two. If India and Mexico’s elections are anything to go by, it is that polls and odds can get it wrong, and nobody is out of the race quite yet.


The debate was dominated by discussions on tax and immigration, and saw Sunak promising tax cuts, pension protection, and reduced immigration, while repeatedly accusing Labour of planning to raise taxes by £2,000 for every working household. Although Sunak's spirited performance may have temporarily boosted Tory spirits, it remains to be seen if he can sustain this momentum throughout the campaign.


What has not helped Sunak’s campaign this week is Nigel Farage's unexpected resurgence. Just a week after ruling out a central role, Farage has taken over the reins of Reform UK and announced his candidacy in Clacton. Launching his campaign in Essex, Farage pledged to 'stand up for the little guy,' 'be a bloody nuisance to Westminster,' and end 'woke nonsense.' This is just the latest headache for the Tory party. While polls suggest that Reform UK are not currently on course to win any seats, if the right-wing vote is splintered in some constituencies, especially those that are more marginal, that could spell quite severe trouble for the Conservative party.


Hundreds gathered on the seafront as the new leader of Reform UK posed for photographs near the pier and made his first major public speech since announcing his candidacy. However, not everybody was happy to have him, the event ended dramatically when a woman threw a McDonald’s milkshake at Farage as he was leaving. You could say it’s been a ‘shaky’ start to his campaign.


While the leaders’ differences on the economy, immigration and the NHS have been brought to light during their campaign so far, these were put to one side on Wednesday as both the Prime Minister and Sir Keir Starmer attended the UK’s national event in Portsmouth which commemorated the 80th anniversary of D-Day. As the nation recalls all of those involved in the largest air and sea invasion in history and the beginning of the end to World War II, I will leave you with our humble thanks for their sacrifice firmly in our minds.


Do have a good weekend.

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