Election results: UK could become “bastion of stability”

There’s a lot to wade through from last night and this morning’s election results, so here’s a quick rundown of what our fund managers and analysts think – with more comprehensive commentary below.

• “The UK could now go from being a poster child of volatility to a bastion of relative stability.”
  Paras Anand, Chief Investment Officer
• “The UK market is finally set to become more attractive for global investors.”
  Alex Stanić, Head of Global Equities
• “The first Budget will offer a clearer picture of Labour’s true intentions.”
  Liam O’Donnell, Head of Macro and Rates
• “We could be about to enter a new dawn for UK equities.”
  Ed Legget, co-manager, Artemis UK Select Fund
• “This should be an important step in at last rewriting the negative narrative around UK markets.”
  William Tamworth, co-manager, Artemis UK Smaller Companies Fund

“This dramatic pendulum swing could mean a material reassessment of the value of UK assets and recovery in the currency, which has devalued substantially over the past decade.”

Paras Anand, Chief Investment Officer

“In recent weeks and months, there have arguably been more unexpected turns in elections around the globe, causing more rather than less uncertainty – and that’s before we get to the upheaval of the current election in France and the uncertainty of which Democrat will face Donald Trump in November.

“All this could mean the UK, from being a poster child for political instability and volatility around economic strategy, could become regarded as a bastion of relative stability.

“We have already begun to see evidence of a growing focus on the UK market by international investors and corporates, but this has been based largely on absolute valuations. If the relative attraction of the UK continues to build, given uncertainty elsewhere, this process of revaluation has a long way to run.”

“The Labour party talked a lot about stability in its manifesto, and if this proves to be the case, it will make the UK market more interesting for global investors.”

Alex Stanić, Head of Global Equities and co-manager of the Artemis Global Select Fund

“There’s no doubt that a closer working relationship with the EU will also help, and the undervaluation of UK equities compared with their US peers certainly provides opportunities. In general, greater stability will encourage investors to commit capital for the long term.”

“The new government will enjoy the autonomy to implement the plan for change its manifesto heralded.”

Liam O’Donnell, Head of Macro and Rates at Artemis and co-manager of the Artemis Strategic Bond Fund

“However, the manifesto was relatively scant on details and bereft of significant promises of change to either investment, tax or fiscal trajectory.

“This could have been the strategy – to avoid making bold promises ahead of election day and just rely on the built-up frustration with the status quo to secure victory. Now, assured of a strong majority in power, Labour could be emboldened to announce further measures.

“The first Budget, expected in August or September, will be the real first test for the market. I believe Rachel Reeves and Sir Keir Starmer will focus on stability and not play fast and loose with public finances.

“Despite a more secure political footing, the UK fiscal situation is still weak – so not much will change in the short term. This will provide stability to the gilt market and, with the Bank of England set to cut rates, creates a more supportive environment for UK fixed income.”

“The election of a new government takes away another one of the objections for not investing in the UK stockmarket.”

Ed Legget, co-manager of the Artemis UK Select Fund

“The Labour party used the words ‘stability’ and ‘change’ continuously during the campaign, and businesses will certainly be looking forward to a sustained period of stability after all the turbulence of the past five years.

“We’ve said for a number of years that the UK economy is in better shape than many commentators have suggested. Unemployment remains low, there’s a high savings rate and increased corporate confidence, and consumer spending is set to rise sharply – particularly with an interest rate cut probably not far away.

“The other missing part of the jigsaw is more support for UK equities from pension funds and institutional investors.

“The new government is committed to a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK capital markets.

“This could help reverse the relentless decline in the domestic UK equity base and in doing so reverse the relative underperformance of the UK market over the past decade. 

“The relative political stability of the UK could see it become something of a safe haven for investors as other parts of the developed world move into an era of greater political uncertainty. We could be about to enter a new dawn for UK equities.”

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“The Labour manifesto was light on big promises, but it actually made a welcome commitment to stability – despite being titled ‘Change’.”

William Tamworth, co-manager of the Artemis UK Smaller Companies Fund

“Economic and political stability, together with an aspiration to strengthen relationships with Europe, could be an important step in rewriting the current negative narrative surrounding the UK.

“After years of outflows, a small change in sentiment could have a magnified impact on the share prices of listed smaller companies.

“Labour also appears to be supportive towards financial services, describing it as ‘one of Britain’s greatest success stories’. The party suggests it will create the conditions to support innovation and growth in the sector through backing new technology and ensuring a pro-innovation regulatory framework.

“If this support feeds through in the next few years it could be another positive tailwind for a key sector in the UK.”