This week's snap election will see the British public decide on the next resident of Downing Street. What impact will this have on the UK stock market?
This week's snap election is the first national vote in the UK since the EU referendum. The focus of this election is Britain’s exit from the EU. Predictions about the outcome of the election and its effect on the stock market focus on which party will be “better for the market” over the long run.
The truth is… the market doesn’t care who occupies number 10: for 60 years and across 12 prime ministers ( Anthony Eden to Theresa May)it has continued to provide substantial returns.
Trying to outguess the market is often a losing game. Current market prices reflect all available and relevant information— including expectations about the outcome and impact of elections. Markets are moved by news, which is random and unpredictable. It therefore follows that the marketʼs movements are unpredictable and random. As a result, it is difficult, if not impossible, to benefit from trying to identify mispriced stocks and therefore unlikely that investors can gain an edge by attempting to predict what will happen to the stock market after a general election.
In our experience, investors should rely on patience and portfolio structure, rather than trying to outguess the market, in order to pursue investment returns.