“Sell in May and go away’” runs the old stock market adage – but what happens when May involves a UK General Election?
It’s scheduled for 7th May this year but the result of the election – whether an outright victory for one party or some shade of coalition – is far from inevitable and uncertainty remains the sworn enemy of investors.
We do suspect that the outcome will be close and as voting day approaches, investor sentiment is likely to be affected by a mounting uncertainty. Nevertheless, it is worth remembering the UK equity market tends to rise in election years. With seven General Elections held since the beginning of the 1980s, the stock market has ended that calendar year higher in six cases – falling only in 2001.
There are still many unanswered questions about the country’s future. Will we end up with another coalition? What can companies expect from the next government? What will happen to the housing market? Should the banking sector brace itself for further punishment? And what role will the UK play within the broader EU?
Recent news has focused on geopolitical issues, from the terrorist attacks in Paris to ongoing developments in the Middle East and Russia. Meanwhile, the outlook for the Eurozone’s faltering economy and the future path of oil prices have continued to create headlines.
Looking at the next few months, speculation about the outcome of the General Election and the UK’s future prospects is likely to gain momentum.
For most of our clients who are investing for the longer term, the constant news flow may be disconcerting but is unlikely to make a huge difference to their portfolio. Once the dust settles, it’s likely little will have changed. The financial markets and investors are much more focused on worldwide trends, less on the varying colour of our own political leadership.
In short, I would calm any fears and encourage all clients and investors to continue their current investment strategy. If you have any specific concerns, then Platinum are always here for you.