Seema Shah of Principal Asset Management says investors shouldn’t make “hasty” changes to their portfolios based on predictions for upcoming elections. This is because recent political surprises in France and other countries caused market losses.
Shah, chief global strategist at Principal, said in a note, “Recent election surprises in Mexico, India, and the European Union have shown how volatile things can become when political outcomes aren’t expected.” “These events show how dangerous it is to base investment decisions on polls taken before an election, since unexpected results can quickly upset stock markets and currencies.”
In the beginning of the month, stocks in Mexico, India, and France all fell after unexpected election results, as shown in a chart in Shah’s note.

MAJOR MANAGEMENT OF ASSETS
“Investors should put resilience first,” she said about the upcoming elections.
It was expected that far-right parties would do well in the recent European Union parliamentary elections. However, Shah wrote, it was not expected that French President Emmanuel Macron would call early elections in France after his party lost in the EU elections. “Markets worry that the outcome could lead to policy paralysis and a delay in fiscal consolidation,” she said.
The Associated Press says that there will be two rounds of voting in France’s parliamentary elections, on June 30 and July 7.
FactSet data show that shares of the iShares MSCI France ETF EWQ have dropped a little more than 7% so far this month. This is an exchange-traded fund that follows an index of stocks in the country. So far this year, the fund is down 1.1%.
Besides European politics, Narendra Modi, the prime minister of India, was re-elected earlier this month. However, Shah wrote, “rather than winning by a landslide, Modi’s BJP party unexpectedly lost its outright majority, casting doubt on its ability to push forward with important reforms.”
The iShares MSCI India ETF (INDA), which tracks Indian stocks, is up about 13% so far this year as of Monday. However, the fund fell earlier this month, dropping 6.1% on June 4 as investors tried to figure out what the election results meant.
“The Morena party won the election with an unexpected landslide victory,” Shah said about the recent election in Mexico. “This has raised concerns that the party may change Mexico’s constitution and may show less fiscal discipline.”
FactSet data shows that shares of the iShares MSCI Mexico ETF EWW are down more than 11% so far in June. This comes after taking a big hit in the first week of the month. In 2024, the fund has lost 15.1% of its value.
“The big one”
“In the next few months, there will be more elections, including the big one in the US,” Shah said. “There will also be elections in France, the UK, Japan!”
An AP report says that there will be a national election in the U.K. on July 4.
In November, people will vote for president in the United States. Trump and Biden are set to have their first debate on June 27. Biden is President and Trump is former President.
As the last few elections have shown, shocks on election night are common. Shah said, “Changing your portfolio allocation to bet on who is most likely to win is a risky strategy.”
So far this year, the U.S. stock market is up. The S&P 500 index SPX has gone up more than 14% through Monday. Dow Jones Market Data says that the index ended 0.7% below its all-time high on June 18.