CMC Markets launches index to track impact of Australian federal election on investor sentiment

Source: CMC Markets

CMC Markets, a leading global provider of online trading, today announced the launch of the CMC Markets Election Sentiment Index (ESI), which tracks the impact of the Federal Election campaign on investor sentiment.

Find the CMC Markets ESI on the global analysts’ news and analysis section of the CMC Markets website.

The ESI uses international benchmarks to examine the relative performance of the Australian share market during the 2016 Federal Election campaign. In stripping market factors, the ESI singles out the impact of shifting political currents on Australian investment.

When the ESI moves higher, Australian investor sentiment, as measured by the share market, is improving. Conversely, negative moves for the ESI suggest the election campaign is weighing on stocks.

The CMC Markets ESI tracks the hits and misses from politicians of all shades, and their market effects, as the Australian public countdown to the 2 July poll. The ESI will be released weekly in the lead up to the election.

Michael McCarthy, chief markets strategist at CMC Markets said: “This year’s election is the first double dissolution election since 1987, meaning policy intentions are more important than usual, as a persuasive argument to the Australian people could result in a strong electoral mandate.

“The CMC Markets ESI takes the daily performance of the Australian share market, and removes performance drivers such as global stock sentiment and commodity price moves, to focus on specific Australian factors. This means the ESI reflects the impact of the slings and arrows of the election campaign on investor sentiment,” said McCarthy.

The CMC Markets ESI performance update: 10 June 2016

The first readings of the CMC Markets ESI showed a positive market reaction to the election announcement. Although broadly foreshadowed, the certainty of a declared electoral calendar appeared to suit investors. Polls then started to show the gap between the two major parties closing to zero, and the index swung lower, as shareholders considered the spectre of another hung parliament.

Also weighing on sentiment were announced policies that target banks for reform, break up or interrogation. With financial stocks comprising around half of the value of the share market, it remains a sector highly sensitive to policy announcements.

Interestingly, the ESI responded to a period of little campaign news flow last week with a gain, confirming that as far as markets are concerned no political news is good news. Superannuation policy remains a focus, as it will hit investor sentiment both directly via the banks and fund managers, and indirectly via the activities of SMSF investors in light of any changes.

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