With the election on 7 November, we're getting lots of questions. Should I switch my KiwiSaver fund? Hold off selling the rental? Lock in a term deposit?

Our answer: whoever wins on 7 November, very little will change for your investments. For markets, this election is close to irrelevant.

What history tells us

Elections rarely move markets much. Since 1927, US shares have returned about the same in election years as in any other year.

When markets do react, it doesn't last. On the night of the 2016 US election, share futures fell 5%. By the next day's close, the market was up. When New Zealand's 2017 coalition was finally announced, NZ shares dipped about 1%, an ordinary week's move.

Bad timing, not bad politics

Here in New Zealand, elections have often lined up with tough economic times, and in hindsight it's easy to blame the vote.

• 2008: National won in November, right in the middle of the Global Financial Crisis. Markets struggled, but because of the GFC, not the change of government.
• 2011: The election came in the same year as the devastating Christchurch earthquakes, while Europe was battling a debt crisis.
• 2020: The Covid election, held in the middle of a pandemic that was upending the global economy.

In each case, what happened to markets had far more to do with what was going on in the world than who was running the country.

Housing is similar. Sales tend to slow before an election as people wait and see, but prices don't follow the vote. They follow interest rates, incomes and supply.

The one time politics did move markets: NZ Power

The best New Zealand example of politics moving markets came in April 2013. Labour and the Greens, then in opposition, announced a joint plan to create NZ Power, a single government buyer of electricity designed to cut power prices and the profits of the power companies.

The reaction was swift. Contact Energy's shares fell around 10% in a day, and within a week roughly $450 million had been wiped off Contact, TrustPower and Infratil. The timing was pointed, too. The Government was just weeks away from selling 49% of Mighty River Power to the public, and ended up pricing the shares at $2.50, below the $2.70 to $2.80 it said it had been expecting. Meridian and Genesis were later sold more cheaply as well.

Then came the twist. Labour and the Greens lost the 2014 election, and NZ Power never happened. Investors who sold in a panic locked in their losses, while those who bought Meridian and Genesis at fear-driven prices went on to do very well.

The lessons? It takes a specific policy aimed squarely at an investment to move markets. And even then, reacting to a proposal is really just a bet on the election result.

Why this election is a non-event

This time, there's nothing like NZ Power on the table. Whoever wins, the big settings that drive your investments stay the same.

• Housing: National isn't promising any changes to property tax. Labour has ruled out touching interest deductibility, and its capital gains tax would only apply to future gains on investment property from July 2027, not the family home. Labour says that's where it stops.
• Shares and KiwiSaver: Labour's capital gains tax excludes both. The KiwiSaver policies on the table are mostly about how much goes in and how it's taxed, and none of them start before 2028. We've broken them down in This election appears to be all about KiwiSaver.
• Interest rates: these are set by the Reserve Bank and inflation, not by who wins.

And under MMP, whoever forms a government will have to negotiate with coalition partners, which tends to water policies down rather than make them bigger. The most likely outcome is that for your house, your shares and your KiwiSaver, 8 November looks a lot like 6 November.

Why "waiting for the election" doesn't make sense

A lot of people tell us they're waiting until after the election before buying a house, investing a lump sum or reviewing their KiwiSaver. We don't think that makes much sense.

There's nothing to wait for. None of the main parties is proposing anything that would change the value of a house, a share portfolio or a KiwiSaver fund in the short term. You'd be waiting for a result that doesn't change the answer.

Waiting has a cost. Money sitting on the sidelines isn't invested, and markets don't pause for elections. Some of the best days in markets come when people least expect them, and missing even a handful can make a real dent in long-term returns.

There's always something else to wait for. After the election come the coalition talks, then the next Official Cash Rate decision, then the Budget. If you wait for certainty, you'll be waiting forever.

And if everyone else is waiting, that can work in your favour. Fewer buyers in the housing market before an election means less competition and more room to negotiate.

So what should you do?

Nothing different. Whether you own a home, a rental, term deposits or KiwiSaver, the election isn't a reason to buy, sell or switch. Trying to time it means guessing both the result and the market's reaction, and that reaction is usually small and short-lived.

What about your KiwiSaver?

Your KiwiSaver is invested globally, and New Zealand shares are only a small slice of our portfolios. Your returns are driven mostly by what happens overseas: company earnings, global interest rates and the big themes we cover in our monthly market wraps. A New Zealand election is a small part of that picture.

A wobble in the Kiwi dollar can actually help. In a small country like ours, the currency usually does most of the reacting to political news, as it did in 2017 when the NZ dollar fell around 2% on the coalition announcement. When that happens, your overseas investments are worth more in New Zealand dollars, which cushions a global KiwiSaver fund.

That's also why switching to a conservative fund before polling day, then back again afterwards, rarely pays off. You risk locking in a small dip and missing the rebound.

The best thing you can do is the same as always: make sure your investments suit your timeframe and goals. Our free KiwiSaver calculator is a good place to start. And if the election noise gets too much, there's always the option we suggested during the last US election: delete your KiwiSaver app for a few weeks, and check back in once the dust settles.

Sources

• T. Rowe Price, analysis of US share market returns in election and non-election years since 1927
• Harbour Asset Management, market reaction to the 2017 New Zealand coalition announcement
• Opes Partners, research on New Zealand property sales around elections
• NZ Herald, Spooked investors off the hook
• NZ Herald, Mighty River $2.50 price hit by power policy
• NBR, Labour-Greens power policy could work, says Vector CEO Mackenzie
• Stuff, Mighty River Power investors hold on through white-knuckle ride
• 1News, Labour rules out interest deductibility changes for landlords

The views and opinions expressed in this article are those of Kōura Wealth and are not an endorsement of any political party. This content is for informational purposes and should not be considered financial advice. Before making any financial decisions, consider consulting a financial adviser. Kōura Wealth Limited is the issuer and manager of the Kōura KiwiSaver Scheme. A copy of the Product Disclosure Statement is available at kourawealth.co.nz/documents. Past performance is not a reliable indicator of future performance.