A little more than a week until the general election - and the financial markets are also worrying about how much this directional decision could drive prices or even lead to turbulence.

Surprises in relation to the surveys could move the bond and currency markets in particular - but also an extraordinarily long and difficult formation of a government, says the economist Andreas Billmeier of the investment company Western Asset, a subsidiary of Franklin Templeton: “The financial markets don't like uncertainty at all;

After the previous federal election in 2017, for example, some investors reacted with concern when the FDP broke off negotiations on the Jamaica coalition at the end of November. "

The fear of stalemate

Christian Siedenbiedel

Editor in business.

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The financial expert describes the expectations of the financial markets from today's perspective as follows: It is most likely that the SPD will become the strongest party on September 26th, the CDU behind, the Greens the third strongest party and then presumably the FDP will come. "If there are large deviations from the polls, that is, the surveys, this could have an impact on the markets - that would be a possibility of tangible consequences for investors," says the financial expert.

If a stalemate between the three likely strongest parties - SPD, CDU and Greens - should lead to very complicated coalition negotiations, this could put a strain on the bond markets and the stock markets for some time, says Billmeier.

A government participation of the Greens, however, would not shake the markets: "This is different from a few years ago."

In the meantime it has become a widespread opinion among investors in the financial market that a green turnaround is necessary: ​​“After all, green financial products have also become more and more important.” The goal of more climate protection is not disputed among most of the parties;

The only struggle is the way and the pace: "As a fright for the financial markets, as in the past, the Greens have definitely had their day."

The greatest surprise for the financial markets with regard to the future government would be a red-green-red coalition, says the financial expert.

At the moment, however, this coalition only has a probability of 15 percent for the bookmakers: "If such a government is formed, it could in fact even move the exchange rate of the euro."

Laschet or Scholz?

For fixed income, “boring” is good

The entry of the Left Party into the government could certainly arouse certain fears in the financial markets about stronger interventions in economic activity. "However, there could be a higher minimum wage and some form of rent limitation even without the Left Party", says Billmeier. "We think it is rather unlikely that the SPD will actually enter into such a coalition with the Left Party in the end, as there are many reservations in the party and the broad electorate."

Unlike the stock markets, the bond markets are traditionally no friends of spectacular election news: "For fixed income, 'boring' is good: Among the conceivable coalitions, the bond markets love the boring, while the stock markets could benefit from exciting constellations," says Billmeier. In this sense “boring” could be, for example, a stable majority for Armin Laschet or for Olaf Scholz. "It is one of the characteristics of this election in Germany, unlike in some other countries, that a middle line of economic policy will win anyway - a government dominated by the economically liberal FDP is just as unlikely as one with a heavy weight of the intervention-friendly Left Party."

Forming a government could be relatively complicated, since from today's perspective a candidate for chancellor would have to rally three parties behind him in order to be able to govern - for the first time at the federal level.

Long negotiations and the associated transition period could create uncertainty in the markets, says Billmeier.

For example, when the SPD and the Greens talked to the FDP first, but the Liberals then realized that the hurdles for a coalition with Red-Green were too big, and that way the Left Party somehow came back into play.

"Talks between the CDU, FDP and the Greens would not be easy either," says the economist.

“It may end up being an alliance between the SPD, CDU and the Greens,” speculates the financial expert.

Compromises lead to higher expenses

After the election it will be an important question how the new government deals with the national debt and the debt brake.

“In the longer term, setting the course on this issue can move both the bond markets and the currency markets considerably.

But you will only really notice that in a few years ”, says Billmeier.

The federal election will not have any direct impact on inflation, says the economist.

One could imagine that a more expansive fiscal policy and higher CO2 pricing by a more left-wing government could also have an impact on inflation rates over time - but here, too, the big parties' plans are not so far apart that this will happen immediately after the Bundestag elections could move the markets.

“We believe that interest rates will rise under almost all possible constellations,” says Billmeier. “On the one hand, expect a relatively high level of expenditure to persuade three parties to assume government responsibility. On the other hand, we believe that next year the ECB will take its foot off the accelerator and reduce bond purchases. "