Stocks And The Upcoming Greek Elections
History shows a New Democracy victory is better for equities
Greek elections are slated for May 21, 2023 and it looks as if its going to be a close contest. This is a great comprehensive look at the possibilities by The Greek Analyst.
To be honest, I am not really one for politics, but the performance of the Greek market ahead of this election has really caught my attention. For starters, Greece has one of the top performing equity markets this year, ranking in the top 10 globally.
Market Performance Before And After Elections
Since 1989, there have only been 3 political parties winning elections; New Democracy, PASOK, and SYRIZA. With a gain of 17% for the Athens General Index this year, its one of the strongest runs we’ve seen ahead of an election.
Performance in both the 4 month and 1 year periods following the outcome has been stronger on average with a New Democracy win. In 2019, ahead of their win, the market was up 29% in the 4 months leading up to the election. The only stronger periods before these most recent 2 elections were in the 90’s, also accompanied by a New Democracy win. PASOK has seen more mild returns both before and after their victories. SYRIZA has the worst results of the group, seeing negative performance across all measured time frames.
Elections & Athens General Index Performance
Boom & Bust For Each Party
A New Democracy win doesn’t guaranteed success for the equity market. Below, the Athens General Index performance shaded by political party shows that all have been responsible for massive booms and busts in the market. PASOK in 1999 and New Democracy during 2008. Market performance was not much better under the tenure of SYRIZA, and it was responsible for some of the most volatile market action the stock exchange has ever seen, forcing its closure for weeks during the summer of 2015.
Banking On (Greek) Banks
Performance of the Greek banking sector has been a significant driver of market returns this year. With a gain of 24%, it has more than doubled the performance of the broader MSCI Europe Banks Index. Banks comprise the majority of the General Index, with a 31% weight, so it has been the largest contributor to performance.
The tone on Greek banks has turned more positive compared to past years. Tracking the recommendations of professional stock analysts, this is the most “buy” ratings they have had on Greek banks since the Great Financial Crisis of 2008.
Analyst buy recommendations increase for Piraeus Financial Holdings
While it all may seem positive, the equity market is still a long way from its former self, sitting 74% below where it once was in 2007. Greek investors have been treading water for a long time but a New Democracy victory could lead to stronger future performance.
great take, interesting, thank you!