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Our
Clients

Financial
Planning

Investment
Philosophy

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WealthFlow

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Comment

Contact

Our
Clients

Financial
Planning

Investment
Philosophy

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WealthFlow

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Comment

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23rd
Jun
2021

Equity Markets and U.K. Prime Ministers

Sustainable thinking

Before reading this article, it is worth noting that recent negative returns in the FTSE 100 (the index under discussion in this article) do not represent a WealthFlow portfolio and clients should not be alarmed by the negative returns discussed.

Following the U.S. election, we published a blog post considering market behaviour under different U.S. Presidents and whether there are patterns or trends. Whilst we may be a long way from a U.K. national election, we thought it would be interesting to see if there were any market trends associated with U.K. Prime Ministers.

Whilst the FTSE 100 is perhaps not an ideal index to use as it is not fully representative of the whole U.K. market, it is used in this article as it is the most frequently used index in the U.K. and the index a government is ‘judged’ against.

Political events and markets are often related. You need only look at many of the recent government announcements and see a direct market response (the initial reaction of the FTSE 100 to the Coronavirus pandemic was to drop approximately 30%).

However, when we look across a Prime Minister’s whole premiership does it ultimately matter what a Prime Minister’s political leaning is?

Many of us might instinctively respond ‘yes’; are market returns and government not intertwined to a large extent? Should portfolios be adjusted according to the government of the day? Surely, some sort of prediction about how the market will fare under a Prime Minister or government must be possible?

The answers (those of you remembering our article on U.S. Presidents will not be surprised) are No, No and No.

The graph below illustrates the average returns after inflation under each Prime Minister going back to the inception of the FTSE 100.

Influence of Politics on the markets UK

Across the time period shown, there have been 10 Conservative governments and 4 Labour governments, with 50% of each delivering positive returns.

To conclude, a U.K. Prime Minister and their government seemingly have very little effect on longer-term market returns and after any initial market shock upon a change of Prime Minister or government, it is unlikely they will have a major influence on subsequent market returns under their premiership.

Patrick Christie
Graduate Trainee Financial Planner – WealthFlow
[email protected]

 

This article is distributed for educational purposes and should not be considered investment advice or an offer of any product for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated. Errors and omissions excepted.

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© 2021 WealthFlow Group Limited
All Rights Reserved | Privacy | Cookies Policy

Head Office & Consulting Rooms: 10 Charlotte Square, Edinburgh EH2 4DR.

Mail correspondence to our Central Scotland Admin Hub: WealthFlow Group Limited, PO Box 14947, Grangemouth FK3 3AU.

Authorised and regulated by the Financial Conduct Authority

For your protection, unresolved complaints can be referred to the Financial Ombudsman Service.

Registered in Scotland No SC635011. Registered Office: 10 Charlotte Square, Edinburgh EH2 4DR.