A study of all 16 general elections since the inception of the FTSE All-Share in 1962 shows that the UK stock market is “by no means frightened of a change in government”, Russ Mould, investment director at AJ Bell, has said.
Pointing to data from LSEG, Mould noted that on average the FTSE All-Share has recorded a double-digit percentage gain in the first year after an election that sees one prime minister ejected from office and another new one ushered into it.
Mould added: “There are also greater average gains when a government changes relative to when it remains the same.
“The headline data suggests that a Labour government, and a change in the identity of the incumbent in 10 Downing Street, need not be seen as an inherently bad thing.
“Moreover, the current Conservative government, whose tenure effectively dates back to 2010 and covers a flurry of five prime ministers, could be seen as having taken an increasingly interventionist approach to the economy.”
According to Mould: “The lack of available cash in the government’s kitty, the Conservatives’ occasionally frayed relationship with ‘business’, and the likelihood that Labour took on board [the] Trussonomics lesson that unfunded promises could prompt chaos may all mean that investors could be in the mood to take Sir Keir Starmer’s big lead in the polls, and any eventual victory, in their stride, even if the FTSE All-Share’s record shows it seems to prefer a Tory government, on average.
"The prospect of a government spearheaded by Starmer and Rachel Reeves is unlikely to spark the sort of fear that would have been inspired by an administration whose driving forces were Jeremy Corbyn and John McDonnell.
"Labour governments can also point to healthy average stock market gains during the terms of their five prime ministers during the 42-year era of the FTSE All-Share. That said, the UK equity market has done better since 1962, on average, when the Conservatives have triumphed at the ballot box."
ima.jacksonobot@ft.com
