In the last three years, the world has gone through changes in geopolitics that have not been observed in the previous fifteen years. This has led governments to introspect on their future and then a global coordinating effort. When such a scenario arises elections hold the most importance as they would lead to continuity or change in policy impacting businesses, citizens and foreign relations.
During the first half of 2024, major countries like India, UK and France held elections. The results in two have been of a divisional mandate leading to the return of an alliances era with its uncertainty. By the end of the year, a new government in the USA will also be elected causing additional uncertainty.
Within this period inflation has been volatile over quarters with some upside risks returning recently. This provides no clear path for interest rates even though some central banks have started with rate cuts. Central banks since the last few quarters have been changing their reserves mix as more focus comes on buying gold rather than US dollar-dominated assets as uncertainty remains high.
The upcoming months can be where equities form some peak closer to pre or post-USA elections. Even GDP data is witnessing some cool-off as businesses prepone their orders as uncertainty near elections remains. During such a period low volatility can result in a sudden spike where the valuations correct in a short period. This might bring gold as a hedge or focus choice for investors, especially in the current uncertainty period.
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