There’s an obvious link between the stock market’s performance and degree of political certainty (or in our case, lack thereof). But let’s take a moment to contextualize this.
What political uncertainty is there? A recognized political party sought the avenues of democratic institutions which leveraged all available legal powers to hold elected representatives accountable. Some people might go so far as to call this a win for the democratic process. The rainbow-shitting-unicorn crowd might even, and validly so, call this a step in the direction of greater political certainty; We now have empirical evidence of a functioning democratic governance structure.
And as far as the stock market is concerned – the story we’ve been convincing ourselves of is that the secular non-cyclical growth trend of Pakistan’s economy is driven by a demographic dividend that hits all the check marks: a large, young population with growing incomes and increasing urbanization and sophistication.
Add to that the notion that the democratic process – erratic as it may appear to the untrained eye – is functioning the way it should… why is the market crashing? It says something about the structure of the economy when investors’ belief in bottom line growth is so highly leveraged to a single party’s control over the political arena.
Are we betting on competitive businesses that are adding economic value to a population with attractive demographics? Or are we betting on a specific set of policies that artificially prop up the wealth statements of those that had enough capital to invest in the stock market to begin with? What do these set of events say about interdependence of those two economic forces?
Would love to hear your thoughts.