Scott Morrison and the Liberals have performed what some are calling a miracle by winning the 2019 election. With the polls and bookies all predicting a Labor win, the weekend’s election result came as a shock to many.
While election results do not historically have a significant impact on the share market in Australia, Saturday nights result will have some short-term impact due to the nature of the Coalition’s win.
There will more than likely be a short term pop as investors will be encouraged by no longer having the uncertainty in regards to who will lead the country over the next three years. The Liberals are also perceived as the better money managers of the two parties. However, this is open for debate.
Franking Credit Refunds Here To Stay
As Bill Shorten was the favourite to be our next prime minister, investors had adjusted their portfolios in preparation for the changes Labor was promising. Large pension funds directed their money into investments that would not be affected by the abolition of franking credit refunds.
This is evidenced in the Australian real estate investment trusts (AREITs) sector, having outperformed the ASX 200 this year. Dividends in AREITs would not have been affected by Labor’s proposed policy as trusts do not offer the refund.
Pension fund managers will now be confident to invest their money into companies where the franking credit refund applies.
Healthcare Shocked, But Insurers Happy
One sector of the share market that will be buoyed by Scott Morrison staying in government will be the private health insurers on the ASX.
Labor planned to put a cap on rises for health insurance premiums which would have affected the revenue of the insurers. On the other hand, healthcare shares will more than likely pullback this week as the promised funding from Bill Shorten will not be delivered.
Do I Adjust?
There may be some opportunity this week for investors to capitalise on share movements post the election. However, investors should have a long term mindset and focus on where their portfolio will be 5, 10 or 20 years down the road — not week-to-week.
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