Year of the election: Why new global leadership matters

The global investment landscape in 2024 is significantly influenced by political developments outside the United States, with key elections in countries like Japan, France, the United Kingdom, and Mexico shaping market dynamics. The US market's high valuations suggest potential shifts in capital flows to non-US equities, particularly if US outperformance reverses. Japan's election outcomes have bolstered investment appeal due to progress in corporate governance and economic normalization, despite political challenges. The UK, under a new Labour government, remains supportive of infrastructure investments, presenting opportunities in electricity and water sectors.

In Europe, infrastructure assets show a disconnect between valuations and trading levels, with the UK government backing investment in key sectors. France faces political uncertainty impacting market performance, particularly in infrastructure assets like airports and toll roads. Mexico's new leadership may present opportunities, though reforms could introduce contractual uncertainties.

Looking forward to 2025, non-US markets offer attractive valuations compared to the US, with potential for growth in sectors like AI, semiconductors, and utilities driven by increasing electricity demand. European luxury goods and companies with strong market positions are poised for growth despite potential tariff challenges. Additionally, China's stimulus measures could catalyze international market growth.

Overall, the global investment environment suggests a strategic shift towards diversifying portfolios beyond the US, with specific attention to infrastructure and consumer sectors in international markets. The potential for easing fiscal policies in Europe and Asia, combined with attractive valuations, underscores the importance of exploring opportunities in these regions.