How will the Election Effect the Direction of the Stock Market?

With the Australian election fast approaching, the big question right now is: which party is best for the future of our nation? Let's be honest, whoever takes office is walking straight into a cost-of-living crisis and a housing affordability nightmare, not exactly a dream. But beyond politics, there's something every investor should be asking. How will the election effect the direction of the stock market? Let’s unpack it.

What is each party bringing to the table?

Historically, it’s simple: Labor spends, Liberal saves. And while both parties are offering similar short-term sweeteners, like tax relief and lower energy bills, their broader economic strategies are worlds apart.

Liberals want to tighten the belt. They’re promising to slash over $40 billion from the national debt through fiscal consolidation, all while championing lower taxes and deregulation. This is music to the ears of big players in mining, energy, and financials, the heavyweights of the ASX. Plus, their embrace of traditional energy alongside renewables could be the boost the energy sector desperately needs, which is already down over 40 per cent since September 2023.

Labor, meanwhile, is placing its chips on growth through spending, pledging $22.7 billion under the “Future Made in Australia” plan to drive domestic manufacturing and job creation. That could help infrastructure, housing, and renewables… but let’s be real, those aren’t the fastest-moving sectors for growth-focused investors. Think REITs and infrastructure stocks, not exactly rocket ships.

Which party has historically had the biggest impact on the stock market?

Since 2004, every time Labor has held office, the stock market has delivered around 8 per cent growth over a four-year term. Respectable, sure but they were also in charge during the 2007 crash. Meanwhile, under Liberal governments, the market has never produced a negative return across any four-year period since 2004, with average gains of 35 per cent. That’s not just good—it’s powerful.

So, what’s the takeaway? If Labor wins, prepare for slower gains in more defensive sectors. But if the Liberals take the reins, history says it could be time to load up—because the high-growth sectors might be ready to run. And that’s the result every investor should care about.

What are the best and worst-performing sectors this week?

The best-performing sectors included Information Technology, up 9.55 per cent, followed by Real Estate, up 5.74 per cent and Healthcare, up 5.29 per cent. The worst-performing sectors included Materials, up 0.47 per cent, followed by Industrials, up 2.62 per cent and Communication Services, up 3.13 per cent.

The best performing stocks in the ASX top 100 included Telix Pharmaceuticals, up 8.07 per cent, followed by Wistech Global, up 7.32 per cent and Paladin Energy, up 6.14 per cent. The worst-performing stocks included Block Inc, down 26.87 per cent, followed by Lynas Rare Earths, down 4.31 per cent, and Computershare Ltd, down 3.29 per cent.

What's next for the Australian stock market?

Buyers dominated the market last week, with the All-Ordinaries Index surging more than 3 per cent. Impressively, not a single trading day closed in the red, which is clear evidence of the strong bullish sentiment currently driving our market. It’s a sharp turnaround from just two weeks ago, when some were forecasting doomsday scenarios for global equities.

This is exactly why staying independent and letting price action lead the way matters. As we highlighted in our last update, the All Ordinaries needed to clear the key resistance at 8200—and once that level gave way, 8400 was next in line. In a clear display of buyer strength, the index didn’t just break through both levels—it closed above them decisively.

There’s no clearer signal: the bulls are firmly in control. Therefore, if this momentum holds, the all-time high is now the next logical target—and at this pace, don’t be surprised if we get there in the coming months.

So, with the bulls running the show and sellers nowhere to be seen, now might be the perfect time to hunt for quality stocks with share prices building momentum.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.