Stock markets could be set to rise in the next few weeks as the date for the 2017 UK election gets closer.
Britain goes to the polls on June 8 and early polling suggests the Conservatives hold a significant lead, with between 42-44% of the votes. (BBC poll of polls 18th April 2017)
History suggests that clear-cut election campaigns have a positive effect on the stock market and one of Yorkshire’s top IFA, Stephen Baxter, Joint Managing Director at Robertson Baxter, believes that 2017 looks set to follow that trend.
“Analysis of the final six weeks of the last seven elections found that the FTSE 100 rose on three occasions, each time when the result was regarded as fairly certain,” said Stephen, whose firm manages the financial future of very high net worth individuals, trustees and charities across the region.
“These were the Labour wins of 1997 (+4.39%) and 2001 (+1.36%) and the Conservative victory of 1987 (+9.7%).
“Whilst there is no guarantee that markets will perform well,” he added, “it is useful to know that in the run up to elections over the past 30 years markets have performed well during times of political stability.”
The strong influence of currency on markets was highlighted last month when Prime Minister Theresa May called a snap election. The move took markets by surprise and, as it was being ratified by Parliament, the pound rose to a six month high whilst the FTSE 100 had its biggest fall since the Brexit vote.
Stephen also has a word of caution for investors on gambling on election results that are not clear cut.
“Investors would be wise not to speculate on polling results,” he said. “2015 provides a cautionary tale where a hung Parliament was expected, but the Conservatives achieved an outright majority. 2010 also illustrates the point where the race was too close to call, markets retreated (-8.15%) on uncertainty. The result was a hung Parliament.
“Long term investors should remember the original reasons for their investment and stick to that plan. They are probably used to the idea that markets can be unstable particularly around major political events.
“They also need to be aware of other factors effecting the markets outside of the election and take heed of the anticipated inflation and manufacturing data due to be released before the 8th June vote.”
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