Implications for investors of UK General Election result

1. UK Election Result – Implications for Investors
Another surprise election result with Theresa May’s Conservative party failing to gain a majority in the House
of Commons.
At the time of writing Mrs May is seeking to form a government with the help of some sort of arrangement with
the Democratic Unionist Party of Northern Ireland.
Sterling fell around 2% overnight but has recovered some of that fall and is actually still above the level it
reached in the aftermath of the EU referendum.
In recent times we have experienced a clear inverse relationship between the value of sterling and the FTSE
100 index of leading UK listed shares. This is because a high proportion of these companies’ earnings are
derived from overseas. A weaker currency enhances these earnings on conversion to sterling.
This is reflected in this morning’s trading with the FTSE 100 index currently around 0.6% higher than
yesterday’s closing value.
The effect on shares of companies more reflective of the UK economy generally is perhaps better measured
by the FTSE 250 index. Whilst this is down around 0.25% at the moment this is well within normal daily trading
ranges. It seems markets are anticipating a ‘softer Brexit’ which investors believe would be better for the UK
economy.
UK government bonds have so far not really changed much in value. This is presumably due to expectations
of better prospects for inflation a ‘softer Brexit’ may bring and the Bank of England continuing to keep interest
rates lower for longer through what will undoubtedly be uncertain times.
We expect volatility in share and bond prices as events unfold. Sterling is also likely to be volatile and will be a
major influence on portfolio returns. However, we would remind investors our portfolios are well diversified
across a variety of asset classes and geographical regions.
It is impossible to predict what will happen in the future but we are satisfied our portfolios are correctly
positioned commensurate with their risk profiles.
If you have any queries please speak to your usual consultant.
9 June 2017