HOW THE ELECTION RESULT COULD IMPACT STERLING, INVESTMENTS, TAX AND PENSIONS THE POUND If polling continues to point to a big Conservative win in the election then sterling will probably remain in a holding pattern until the results come in. Confirmation of a Tory majority would likely give the currency a short-term boost. Bill Dinning, chief investment officer at Waverton Investment Management, comments: ‘There are still many risks to sterling during an election campaign. ‘Many of the issues that truly concern the electorate – the NHS, schools, student debt, housing shortages, general malaise about living standards – are seen normally as “Labour issues” by which I mean that opinion polls tend to indicate that Labour is seen as better at dealing with them. ‘But we do not live in normal electoral times and the Labour Party’s divisions are a headwind for the party which may diminish their traditional strength in those policy areas.’ If the election starts to move towards those
issues and away from Brexit, and if that is reflected in the polls, then you would expect sterling to retreat. Nigel Green, CEO of financial adviser deVere, says: ‘Expect the pound and UK financial assets to be increasingly volatile in the run-up to the general election, given the wide-ranging set of outcomes. ‘The most detrimental of these outcomes for sterling, UK financial assets and the wider British economy, include another hung parliament or a victory for Jeremy Corbyn’s Labour Party.’ However, if Labour were to form a coalition and call a second referendum with remaining in the EU as an option, this could be positive for the pound in the long term, assuming it delivered a ‘remain’ result.
INVESTMENTS The lead-up to an election could potentially benefit media group YouGov (YOU:AIM) which is best known for polling. The results this time round could be very close to call and so YouGov is likely to be in hot demand to constantly measure how the public is thinking ahead of the big vote. In normal circumstances, Royal Mail (RMG) would pick up more work from an election as political parties seek distribution for their campaign literature. Postal votes would also give Royal Mail a boost but the big question mark is whether strike action threatened by members of the Communication Workers Union would disrupt the business at a crucial time. Failure by Labour to get elected could trigger
a big rally in several different parts of the stock market as a sigh of relief by investors, given how many Labour-related policies have already been priced in to many sectors. 07 November 2019 | SHARES |
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