The four governance trends that will impact investments in 2024

We survey predictable and less predictable governance dimensions across four areas of governance: political governance, corporate governance, the governance of non-market institutions like central banks, as well as systems governance within the financial system.  

Governance affects markets both negatively in the form of poor decision-making in front of key challenges, and positively such as sharp adaptation to required transformation and the capability to foresee essential matters.  

Our top four predictable governance events for investment performance are:

1. US presidential and parliamentary elections impacting investments through governance 

Other elections will matter next year. Besides Taiwan in January, India and Indonesia later in the year, and other political or geopolitical meetings like the G20 in Rio, as the most powerful political governance event of 2024 by far, the US election will transform the world. Still, while it may not directly affect 2024 economic growth, it will still impact investments through its usual mix of social revelations and mid-term expectations.  

Electoral promises are expected to increase divisions in an already conflicted world. The electoral process will leverage the current psycho-sociology of the masses that thrive on conflicts and scapegoats. Whoever is elected, themes such as exposure to US-China tensions, for example, and the readiness/preparedness to act will be a differentiator for corporates.  

Some highly exposed organizations such as HSBC have prepared themselves – but not all. Some industries like automotive or utilities will be affected but in very different ways. The fast redistribution of supply chains is the new order for most global industries. Reshoring countries such as India, Mexico, and Vietnam, which are reintegrating business operations that had been moved overseas, are our preferred choices in emerging markets.  

2. Central bank governance 

As economies are stressed by a combination of factors such as inflation, currency value, debt, and downright slowdowns, central banks are key actors, and the quality of their governance will continue to affect markets through smart rebalancing and sharp decision-making as the world evolves.