On August 9th, Kenyans will go to the ballot to decide who will hold the country’s highest office for the next five years.
The vote will also determine who makes up the national assembly representatives and the senate.
Usually, investors at this time are jittery about what will happen to their investment portfolios. Many fear that their investments will take a dip.
Experts say that the election’s impact on your portfolio will likely be short-lived unless the general economic environment is poor such as in an economic recession.
Using historical data, you can make informed guesses although no one knows what exactly will happen.
However, coupled with the current events, it may be harder to make sense of it all.
Even before we could fully recover from the Covid-19 pandemic damage, there is the Russia-Ukraine conflict which threatens to increase fuel prices up to $180 a barrel, a looming global recession according to JP Morgan analysts.
Given the approaching general elections, pressure will mount on the National Treasury to maintain the current subsidy on fuel in the country.
Consequently, the cost of goods in the country will shoot. Thus, the adequacy of your personal finances and the performance of your portfolio will not be pegged solely on the general elections but will be tied to varied influences.
If we were to focus only on general elections, the NSE All-Share Index, which tracks the market capitalization of all companies listed on the Nairobi bourse stood at 171.2 and 136.7 points in 2017 and 2013 respectively.
This, compared to 133.3 and 94.86 points in 2016 and 2012 respectively, shows that the stock market averaged positive performance despite the elections. Clearly, your biggest threat is the soaring cost of living.
Here are some tips to navigate this tide.
Establish a financial plan
To start with, a budget will assist in keeping track of your expenses and comparing it against your income. Create a limit to your spending each month so you can ramp up your savings for a rainy day. This is not the ideal time to make any major purchases. For starters, let the prices settle. If you are a business owner, be forward-thinking in your financial plan even after the elections. You can expect some regulatory changes when the new government is in. Keep building your business and financial wealth while consumer spending trends up as many people continue enjoying the benefits of their own artificially inflated budgets.
Check your debt
Track your loans and debts and make sure you have budgeted to pay them off. Since a new president or parliament may champion their agenda that could touch on interest rates, it is safer to opt for fixed interest on your loans.
Take advantage of volatility in investments
It is important to be aware that volatility tends to be higher and returns tend to be lower in an election year. The precariousness is usually linked to shifting opinion polls and campaign stumping that normally intensify market moves. This may present good buying opportunities for shrewd investors, but at the very least it is important to be aware of the chance for higher volatility and prepare for it. The markets ordinarily recover from these bumpy patches soon after elections.
Maintain long-term focus
Regardless of the outcome of the August polls, we are looking forward to an increase in spending as promised by leading contenders, political stability, and a stable business environment. Thus, stay focused on your goals be it buying a home or meeting your retirement savings target, don’t take your eyes off it.
Albanus Muthoka is the head of pension admin and consulting at enwealth financial services.
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