This week, on 4th July, Voters will have their say in which party will lead us forward for the next four years. There has been widespread dissatisfaction with the current Conservative Party, the primary Governing party in the United Kingdom since 2010. Due to this, pundits are expecting the Labour Party to win a historic victory. Despite this result appearing to be already cast in stone the prospect of elections in any country brings an inherent unpredictability, particularly for investors. Changes in political leadership – by definition – bring new policies, strategies and approaches.
In this blog, we have compiled our views on the likely outcome and how they’re managing short-term anticipation in the markets with long-term investment opportunities.
Key takeaways:
- Pundits expect the Labour Party to win decisively, given the current dissatisfaction with the Conservative Party.
- Despite the potential for political upheaval, historical data shows that markets typically remain resilient to election results, with minimal long-term impact on market trends.
- JNFP’s strategy does not attempt to predict election outcomes but focuses on maintaining diversified, high-quality portfolios to ensure stable, long-term returns.
The UK election
Scandals like Partygate under Boris Johnson, policy errors causing market disruptions under Liz Truss, and general malaise under Rishi Sunak have led voters to seek new leadership. As a result, polls have long predicted a significant advantage for Labour. It was a surprise to many that a general election was called early by the incumbent Prime Minister. However, this daring move to catch the opposition off-guard appears to have backfired.
Markets have not responded significantly since the election was called, nor to developments during the campaign, likely because many investors consider the result a foregone conclusion. The lack of response may also indicate that markets are not concerned about the outcome, particularly as Labour now presents itself as more moderate compared to its stance in the last election under Jeremy Corbyn’s tenure. This shift, along with a necessary but yet-to-be-determined investment strategy, is likely reassuring for investors who prioritise stability and moderation in government above all else.
Furthermore, markets historically tend to be unaffected by election results. While some fluctuations are observable around election day, the overall trend remains largely unchanged by electoral developments over extended periods.
The impact of elections
Governments can shape policies that can materially alter business decisions, impacting how corporations and organisations function. Investors may try to anticipate election results to get ahead of the curve. This might not be the best approach given how long it typically takes for policy changes to be implemented.
Our long-term view, factoring in capital markets assumptions and the macro-environment, leads us to keep our portfolios fully invested with good diversification and a strong bias towards quality businesses throughout our underlying funds. We believe this will deliver the best risk-adjusted returns for clients over the long-term.
To discuss your investments with our investment management team, please call 01905 779193 to book a consultation.
*The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.
*The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction.