Election 2015: An unexpected outcome
Now that the dust has settled following the recent General Election Financial markets have generally reacted positively to the news the Conservative Party has won a majority.
This has less to do with any political conviction but rather the belief that continuity and certainty is supportive to business generally. The threat of weeks of feverish negotiation between party leaders to form a government threatened instability, and both business and the public were relieved that this was avoided.
Investors had generally been expecting another hung parliament and therefore financial markets had not really factored in the possibility of an outright majority. As a result, share prices have risen on relief that an element of uncertainty – which markets particularly hate – has been removed.
In particular, the news provided a boost for share prices in the banking, energy and house building sectors, which had all been expected to come under pressure from a Labour government. Labour had promised to enforce further regulation on the banking sector and to impose new regulation on the energy and property markets.
Immediate gains have been especially pronounced among medium-sized companies – which tend to be more exposed to the domestic UK economy than the global multinationals in the FTSE 100 index – and the FTSE 250 index reached a new high following the election result. Meanwhile, sterling surged against the euro on the news of the Conservative victory and, having risen sharply in the run-up to polling day, the yield on the benchmark 10-year UK gilt subsided.
For now, at least, the election result has provided a certain amount of clarity amid hopes that current government policy will remain in place. This clarity is expected to deliver a short-term confidence boost for investors and is also likely to provide support for business investment in the longer term.
With the General Election now out of the way, investors’ attention is likely to revert to the timing and scale of an interest-rate rise while, looking further into the future, political uncertainties will be kept alive by doubt over the UK’s role within the European Union (EU).
Prime Minister David Cameron’s past promise of a referendum on the UK’s EU membership by 2017 is likely to trigger fresh speculation over the UK’s future within the EU, leading to anxiety over the potential implications for the UK economy and for the pound. Meanwhile, strong gains by the Scottish National Party could reignite the thorny issue of Scottish independence. Elsewhere, having pledged not to raise income tax until 2020, the government still has to meet its deficit reduction targets.
In politics there is never complete certainty, but the recent election has formed a good foundation for economic growth, and markets have responded positively to this.
If you would like to learn more about the investment opportunities that have opened up following the election please contact Shaun Bell or Stuart Read at Sabre Financial on 01548-856444 or via email at firstname.lastname@example.org or email@example.com .
Sabre Financial is the trading title of Sabre Financial Planning Ltd. Sabre Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.
By Sabre Financial | Friday, May 01, 2015