Every five years, politics and finance converge as Kenyans elect political leaders.
Investors at the same time try to figure out what the outcome means for their portfolios.
A look at history shows election cycles indeed correlate with securities’ market returns.
2015 was a difficult year for investors at the NSE as the share index went down. While there are plenty of reasons why equities may struggle this year, such as falling oil prices, slowing global growth and election-related uncertainty, the securities market has, for the most part, ebbed and flowed with the five-year election cycle for the past 20 years.
Bear markets and recessions tend to start in the first three years of a President’s term, bull markets and prosperous times mark the latter half.
But no one needs to tell you that the current cycle is anything but average. On the other hand, volatility might tend to develop in 2018, as the market digests change, and then gradually increase to its peak in 2019.
In the run-up to the election, returns will tend to move sideways as a reflection of greater uncertainty.