Federal Election result a lesson in patience
The surprise result of the federal election should serve as a warning to all that policy proposals and polls are not good instruments for investment strategies.
“We had a lot of concern during this election campaign that some of the policy proposals were being acted upon as a done deal,” says Phil La Greca, SuperConcepts Executive Manager Technical and Strategic Services.
“There was a lot of commentary around preparing for a Labor victory particularly with the franking credit proposal, and it led to a range of behaviours that must serve as a lesson for understanding the realities of the legislative process.
“We saw people adjusting portfolios, selling down assets and rolling money out in preparation for a Labor victory just because it was in a press release and backed by polls which have becoming increasingly less reliable as predicters of election outcomes.
“We saw Banks and other large companies announcing additional dividends before June 30 to soak up the lost franking credit refund that they wrongly assumed would happen with a Labor victory.
“It’s now uncertain if those announcements will still happen, and if so what happens if they push shareholders up the tax scale if it’s paid in addition to the franking credit refund they currently receive.
“While these would all appear be have been prudent actions, they were predicated on a range of outcomes, namely the election of Labor, then the drafting of a Bill to reflect the proposal, then passing of the Bill through both houses of parliament in its originally stated form.
“The lesson from this election campaign is that it’s prudent for advisers and trustees to plan around policy proposals but not act until there is more certainty around the final shape of the legislation, which can be a long way from the original proposal.
“Advisers and investors who took action or advised clients along these lines are now learning a tough lesson that a press release during an election campaign is not the same as legislation,” says Mr La Greca.
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