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Writer's pictureRemil Hizon

How does the PSEI perform during an Election Year?

Updated: May 9, 2022


One of the best ways to gauge future market movements is to revisit historical price action patterns and previous underlying economic conditions. By analyzing how the market moved in the past during critical political and economic points of the country, we can anticipate potential market movement when it cycles back to similar conditions.


One of the major principles of Technical Analysis is that history repeats itself.

In this post, we will revisit the previous election years of the Philippines and analyze how the market price action moved for each respective election year.


Historical Market Performance of the Past 5 Election Years


Historical price action has shown that every election year has experienced a surge in institutional demand 5 - 6 months prior the election date and 5 - 6 months after the election date.


Leading to the election date, this brief rally is primarily driven by election campaign spending that provides a temporary boost in consumption. However, this 2022, it is evident that high inflation, high interest rates and the Ukraine war crisis have halted any potential pre-election market rally.


After the election date, mid year rallies have also happened mainly due to renewed optimism. This has been observed to be the case regardless of who the winner is. As long as it is a clean and peaceful election that reflects the will of the majority, the market will digest it positively.


PSEI performance 5 months prior and 5 months post election date:

PSEI performance 1 year after election date:



2004 Election Year


1. Technical review


The 2004 election year price action has been a mixture of strong breakouts and extended consolidations. The election year started with a pullback move via a Bullish/Falling wedge that led to a brief pre-election rally.


After the election date, a gradual climb happened within a Volatility Contraction Pattern (VCP). This VCP structure was fully validated when a major breakout materialized leading to ladderized rally that lasted for the rest of the year.


In terms of price action, the 2004 election year is an ideal template of a good balance between strong rallies and manageable pullbacks. Sellers have been absorbed by stable consolidation and contraction structures that regularly led to strong breakouts.



2. Fundamental review


Please note that this fundamental review ONLY covers the election year of 2004.


2004 is the advent of the Macapagal-Arroyo administration. The newly elected president have made promises to continue economic reforms to help the Philippines match the pace of development in the newly industrialized countries of East Asia. The strategy included improving the infrastructure, strengthening tax collection to bolster government revenues, furthering deregulation and privatization of the economy, enhancing the viability of the financial system, and increasing trade integration with the region.


Prospects for 2004 were heavily based on the economic performance of two major trading partners, the US and Japan. This and the increased economic confidence of the global investing community.



2010 Election Year


1. Technical review


The 2010 election year price action is defined by strong rallies both at the start and the end of the year.


Mid year movement leading to the election is emphasized by a higher base consolidation structure coming off from a pre-election rally. This consolidation move was capped by a VCP breakout pattern leading to a huge 32% market rally.


End of year price action was a bearish reversal pattern that led to an extended pullback move that lasted until the first quarter of 2011. This was however followed by a much stronger market rally by 2012.


2. Fundamental review


Please note that this fundamental review ONLY covers the election year of 2010.


Benigno Aquino III started 2010 with a stable foundation built by the Arroyo administration.

A regime of low interest rates, low inflation, and banking stability deserves a lot of credit. The Bangko Sentral ng Pilipinas kept its policy rate between 3 to 4 percent throughout most of the 2010s, ushering in an era of cheaper credit.


The election had a significant impact on the economy, with the administration of outgoing President Gloria Macapagal-Arroyo lifting spending in the lead up to the poll. Added to the government spending were large outlays by candidates of all political hues, which again fuelled growth. The first two quarters of the year saw a surge in GDP, which increased by 7.8% in the first three months of the year and 8.2% in the second, before cooling somewhat in the third to a still healthy 6.5%.


The country’s growth in 2010 was helped by the Bangko Sentral ng Pilipinas (BSP) keeping interest rates low, a move that encouraged banks to open their coffers and boost consumer lending. According to data released by the reserve bank on January 3, there was a 12% increase in the volume of consumer loans from commercial and universal banks in the first nine months. This is hard evidence of increased consumer spending that helped bolster economic growth for the year.



2016 Election Year


1. Technical review


The 2016 election year price action is comprised of a bullish Q1-Q2 and a bearish Q3-Q4.


The election year starts with a pullback leading to a bullish divergence reversal. The reversal move kickstarts a 32% market rally that lasted until the tail end of Q2.


Midyear price action begins with a clear breakdown from the trendline support which led to a steep retracement that lasted for the remainder of the year. The market then proceeded to make a 39% rally on 2017 that peaked to the all time high level of 9000.


2. Fundamental review


Please note that this fundamental review ONLY covers the election year of 2016.


2016 is the advent of the Duterte administration. The Philippine economy continued to sustain its growth momentum in the first quarter of 2016. The Philippine Statistics Authority (PSA) reported that gross domestic product (GDP) accelerated to 6.9% during the period from 5.0% in the same period in 2015. The main drivers of growth were industry and services on the supply side, and investments and private consumption on the demand side.


Major components that fueled the economic growth of 2016:

  • Steady increase of private consumption

  • Investment expansion which outpaced consumption

  • Stable fiscal spending

  • Strong imports boost trade growth by end of 2016


In a Nutshell


When we analyze the past 5 elections of the Philippines, we can observe recurring market patterns that have been consistently present during each election year. The market has consistently shown its strongest price action move within the first 3 years of each administration and exhibits its weakest movement during the last 3 years of the remaining term.


For each election year, there has always been some form of mid year market rally after the election month. External economic factors will of course play part on how sustainable such rallies are but renewed optimism have bolstered market sentiment each time.


Consolidating all these technical and fundamental data, we can make the initial analysis that the start of each administration is a prime opportunity for short - medium term accumulation to profit from potential market rallies.



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