The UK faces a General Election on 4th July and the prospect of a new government. What does this mean for your investment portfolio, and do you need to take actions to prepare for this?
There are three main reasons why we believe that the election will have little impact on global markets and why you should take no action:
First, the outcome is largely predictable. Polls expect a significant Labour majority and, even if they are wrong, it is still likely that Labour will lead the next government. Markets have already priced in this result and so a Labour victory will have little impact on markets.
Second, the alternative outcome is not very different. Most economists and political commentators agree that there is little difference, economically, between the parties. What this means is that, whoever wins, their actions and the impact on the economy, are likely to result in similar outcomes as far as investment markets are concerned.
Third, the scale of the UK economy. Whether we like it or not the UK economy has a relatively small impact on global markets. If you’re invested in a diverse, global portfolio then your exposure to the UK economy will be less than 10% of the value of your portfolio. Even if a new government did deviate unexpectedly from current policy, as Liz Truss and Kwasi Kwarteng did in 2022, the impact on a diverse global portfolio will still be relatively small.
For all the above reasons, our view is that there is no need to adjust your portfolio because of the election. The impact on global markets is likely to be negligible.
If you do have any questions, please contact your financial planner.
