A week has passed since the general election saw a Conservative government take power and the leaders of political parties resign in defeat. With the dust settled and a new cabinet now appointed, what does the result mean for investors?
True Potential Investments’ Chief Investment Officer, Colin Beveridge, shares his thoughts:
“The election result came as something of a surprise, causing UK shares to rise and sterling to strengthen. The latter represents a positive shift in favour of improved growth prospects for the UK economy.
“Post-election optimism is not new. Inevitably, events and forces that affect an open economy, like the UK’s, replace it. In this respect, the inflationary outlook is important. This will drive the future path of interest rates. We may see a slow interest rate rise trajectory as debt levels remain high, but events can and do shift quickly.
“The Conservatives are pro-business and deficit reduction will help underpin international investor confidence in the UK economy, which will in turn keep overseas demand for gilts high.
“There are, of course, challenges. There is a looming debate and referendum on Europe, and domestic political considerations with the rise of the SNP in Scotland to consider.
“The UK election result is important for UK investors. Governments are capable of mismanagement, but our sense is that the UK’s economic performance will be better under David Cameron. Beyond the UK, investors face the rollercoaster of global economic forces ranging from a speculative bubble in Chinese shares to stimulus programmes in Europe and Japan. In there own way they ripple back to the UK.
“Investors navigating these choppy waters require the right tools to manage currency exposures and asset class volatility. It also brings opportunities for active, multi-asset managers focused on selling expensive assets and buying cheaply.”
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