A frequently discussed topic in financial publications Fisher Investments UK reviews: will political instability derail markets? The concern is understandable. Weak governments on the brink of collapse – and the possibility new faces, especially from upstart or formerly fringe parties, sweep into power – can stir chatter that major change is afoot, with attendant uncertainty weighing on equities. The ascent of populist politicians and parties during the 2010s and early 2020s have amplified views of radical forthcoming legislation should they enter government. But political instability isn’t inherently a market negative, as we will explain.
Please note, Fisher Investments UK commentary is nonpartisan, and our analysis focusses on politics’ economic and market implications only – particularly for developed nations, for our purposes here. However, political systems vary worldwide. Some countries have political power concentrated in a single political party or even an individual. In these situations, political instability could produce more unknowns, since it would be unclear who would fill a potential power vacuum. But in Fisher Investments UK’s reviews of most developed economies with representative democracies, the typical political structure limits any one arm of government’s powers, to varying degrees and by varying means.
Political instability has been a seeming feature of European politics recently, but it isn’t new. Italy has historically been the posterchild of frequent government turnover. Before Prime Minister Giorgia Meloni took power in 2022, Italy had 68 governments since the end of World War II – averaging a new cabinet every 13 months.[i] Spain, the Netherlands and France have had high-profile government collapses in recent years. In Asia, Japan has a reputation for having a revolving door of prime ministers, i.e., frequent premier turnover. The late Shinzo Abe, who served a second stint as prime minister from December 2012 – September 2020, was not the norm. Since he stepped down, Japan has had four different premiers through October 2025.
Throughout the financial publications Fisher Investments UK reviews regularly, many commentators argue frequent political turnover is a negative for markets. The prospect of change stirs uncertainty and weighs on business confidence, and not knowing how policies might change risks making investors take a wait-and-see mindset. Today, we see this across much of Europe and the developed world in how people approach the rise of various new populist parties – presuming these politicians, should they enter power, will inevitably make good on extreme-sounding campaign pledges and upend the status quo.
In our experience, political instability concerns stem from certain assumptions – namely, that the incoming politician will actually implement major change. We have often found that if investors personally disagree with that politician or political party, they presume their governing will also be negative for markets. But we think this assumption is an error and rooted in bias, which can lead to investing errors. Newly elected officials can win office due to their personal charisma and campaign promises, but their ability to implement change can encounter roadblocks. Fisher Investments UK’s reviews of recent political history in Europe show this.
In the Netherlands, for example, the populist Freedom Party won the most votes in 2023’s general election – due in large part to the popularity of its leader Geert Wilders. But the Freedom Party wasn’t close to wielding a parliamentary majority. Instead, the Freedom Party negotiated with three other parties for nearly six months to form a coalition government. This arrangement didn’t even last a year before collapsing, setting the stage for an October 2025 election. The Netherlands isn’t an outlier. We have seen new governments fail to make good on campaign pledges or moderate once in office throughout Europe, from France to Italy. Faces atop governments may change, but laws and rules shift less – and that is what equities chiefly care about, in our view.
Rather than the person or party in charge, Fisher Investments UK’s reviews of stock market behaviour find markets care most about policy – and the likelihood policy ideas become reality. These rule changes can more directly affect the factors influencing corporate earnings, sales and economic activity at large. For investors, we think it is beneficial to focus less on who is in charge and more about what the government can (and can’t) do. For instance, does the party in power hold a sizable majority in the legislature? That could increase the likelihood the government passes sweeping laws that could create winners and losers, which could indeed fuel uncertainty that weighs on sentiment. Also, can the legislation survive legal challenges? Besides domestic courts, the European Court of Justice (ECJ) can contravene (i.e., find a nation’s law violates a European Union treaty) and declare the change unlawful.
We aren’t arguing investors benefit from ignoring political turnover. Monitoring for the risk of new legislation or regulation is a sensible investing practice. But context is key, as a new face doesn’t mean big change is forthcoming, either.
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This document constitutes the general views of Fisher Investments UK and should not be regarded as personalised investment or tax advice or a reflection of client performance. No assurances are made that Fisher Investments UK will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. Nothing herein is intended to be a recommendation or forecast of market conditions. Rather, it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. In addition, no assurances are made regarding the accuracy of any assumptions made in any illustrations herein. Fisher Investments Europe Limited, trading as Fisher Investments UK, is authorised and regulated by the UK Financial Conduct Authority (FCA Number 191609) and is registered in England (Company Number 3850593). Fisher Investments Europe Limited has its registered office at: Level 18, One Canada Square, Canary Wharf, London, E14 5AX, United Kingdom. Investment management services are provided by Fisher Investments UK’s parent company, Fisher Asset Management, LLC, trading as Fisher Investments, which is established in the US and regulated by the US Securities and Exchange Commission.
Investment management services are provided by Fisher Investments UK’s parent company, Fisher Asset Management, LLC, trading as Fisher Investments, which is established in the US and regulated by the US Securities and Exchange Commission. Investing in financial markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance neither guarantees nor reliably indicates future performance. The value of investments and the income from them will fluctuate with world financial markets and international currency exchange rates.
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[i] “Italy Has Its 68th Government in 76 Years. Why Such a High Turnover?” Andrea Carlo, EuroNews, 11/10/2022.