In our previous post, we explored how bond yields have been making a comeback. Now, we turn to another critical financial lesson from 2024: the link between inflation, real wealth, and political stability.

 

High inflation doesn’t just erode purchasing power—it also fuels economic uncertainty and political instability. In 2024, several countries with above-average inflation saw ruling parties lose elections, reflecting widespread voter dissatisfaction.

 

Notable examples from recent elections:

• United States: Vice President Kamala Harris, representing the Democratic Party, lost the presidential election to former President Donald Trump, marking a Republican return to power.

• United Kingdom: The Conservative Party, led by Prime Minister Rishi Sunak, faced a substantial loss in the general election, with the Labour Party securing a decisive victory.

• South Africa: The African National Congress (ANC) lost its parliamentary majority for the first time since the end of apartheid, leading to a coalition government formed by opposition parties.

• South Korea: Liberal opposition parties, led by the Democratic Party, gained power in parliamentary elections, unseating the incumbent conservative government.

• France: The ruling party suffered major losses, with both far-right and leftist parties making significant gains—clear signs of voter frustration.

• Germany: The Social Democrats (SPD) faced setbacks, while the far-right Alternative for Germany (AfD) gained increasing support, particularly in the eastern regions.

• India: Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) lost its majority, resulting in a coalition government led by opposition parties.

• Japan: The ruling Liberal Democratic Party (LDP) saw major setbacks, losing a substantial number of parliamentary seats to opposition parties.

 

The Bigger Picture: This wave of anti-incumbent sentiment underscores a global trend—high inflation often leads to political shake-ups. Economic instability erodes public confidence, shifting voter priorities and challenging long-standing political leadership.

 

 What are your thoughts? How do you see high inflation impacting political stability and real wealth in the future? Let us know in the comments below!

 

Stay tuned for the next post in our mini-series, where we’ll dive into another key financial takeaway from 2024.