King's College London

Focusing on the 2022 Brazilian presidential race between Jair Bolsonaro and Luiz Inácio Lula da Silva, researchers found that voters closely watched the financial sector to judge a candidate's economic competence.

Researchers, Raphael Cunha (King’s College London), Sarah Brooks (Ohio State University), and Layna Mosley (Princeton University), conducted a randomised survey experiment on more than 2,500 voters between the first and second rounds of the election.

They discovered that when voters were informed of a positive market rally following a candidate's electoral performance, that candidate’s perceived economic competence and overall favourability surged. Conversely, when informed that international investors were worried about a candidate's future macroeconomic policies, voter evaluations dropped.

The market signals also showed signs of being able to influence decisions at the ballot box. Investor warnings about a candidate were enough to sway uncommitted, undecided, and centrist voters toward a particular candidate.

The authors suggest voters may rely on market cues for two main reasons. First, citizens understand that market shifts affect their personal material wealth, particularly those with investments or personal debt tied to interest rates. And, secondly, voters use investor sentiment as a reliable shortcut, or elite cue, to evaluate a politician's overall ability to govern the broader economy.

While the study notes that party loyalists frequently ignore negative financial news about their preferred candidate due to partisan attachments, the results demonstrate that global investors can act as a critical voting guide for the political centre

The academics said: “While existing scholarship has focused on explaining public preferences over different policy dimensions related to the external financial sector, we show that developments in international financial markets can also affect domestic political outcomes.

“Moreover, while the existing literature has emphasized the role of material self-interest and individual dispositions like nationalism, our results also highlight the importance of investors as sources of cues regarding political actors’ competence.”