The Year of Democracy: what’s the big story?

It has been heralded as the biggest global election year in history. Over 60 countries are either confirmed or likely to be heading to the ballot boxes over the course of 2024, accounting for 48% of the world’s population. Included among them are the three largest democracies in the world, namely the US, India and Indonesia. We take a view as to the likely impact on financial markets.

While the numbers are impressive, the wide range of potential outcomes for these elections means this has also been dubbed ‘The Year of Uncertainty’. In some regimes, whose leadership could be considered more authoritarian, the results are likely to be a foregone conclusion. But in others, the election results are harder to predict with any certainty, and existing policy could be completely overturned.

Top billing for markets this year are the US presidential elections on November 5th. The contest appears likely to pit incumbent Joe Biden against former president Donald Trump. Biden’s first term was characterised by vast fiscal stimulus, aimed at greening the US economy. Biden also reaffirmed US commitment to international security alliances such as NATO, as well as rejoining the Paris Agreement on climate change. A change of administration could see these decisions reversed. It might even bring an escalation of the trade war between the US and China.

AI could play its own part in this election year. Pundits are warning of the danger of AI generated fake media content, saying “the political deepfake moment is here.” Indeed, the New Hampshire primary was briefly thrown into confusion by a deepfake video, which appeared to show President Biden urging people not to vote at all. Voters will need extra vigilance when choosing among candidates. Consumer advocacy groups have already warned of electoral chaos.

The rise of populism, fostered in some regions by uncontrolled migration, could see voters’ long held allegiances switch. And new leaders with more extreme political views could cause alarm in financial markets. On a broader view, however, geopolitics is considered the biggest tail risk to markets this year. Concerns include an escalation of the Middle East conflict or any increase in US-China trade tensions. Nonetheless, uncertainty over election outcomes can trigger short term sentiment swings, making it likely that markets will be navigating bouts of volatility throughout this landmark year.