The snap general election (8 June – the 88th anniversary of Margaret Bondfield becoming the first female Cabinet member in the UK, under Ramsey MacDonald, Labour PM) has caught investors on the hop somewhat, not least because, prior to today, it seemed inconceivable that 2/3rds of sitting MPs would vote for the change to this fixed-term Parliament. With the Labour party and indeed Liberal Democrats in (different degrees of) disarray, it might have seemed that agreeing to a Conservative request for a general election was the last thing they would do, but with the date called, it is apparent this will be turned into ‘Brexit: how do you want it?’ and on that basis, everyone apart from the SNP will probably agree in tomorrow’s vote in Parliament.
With regard to markets, sterling has understandably looked up, though to nothing like the extent it has fallen since the early hours of 24 June 2016, and UK equities, as led by the overseas earners, have fallen. The complexity is perhaps another reason investors have reacted as they have – the French election (the first round of which could almost be too tough to call, as four of the five candidates are one polling error away from winning or being knocked out) and worries over North Korea vs the rest of the world being just two matters already occupying minds …
Simon Gibson, Mattioli Woods Chief Investment Officer, said “Our general caution is unchanged ahead of what could be a volatile period anyway, and our preference for UK smaller companies, in an environment where sterling may now strengthen a little, is likely to be helpful. We still hold gold and other non-correlated assets, as our new perspective develops on how asset allocation needs to change. Looking at the potential outcome, a stronger majority (and therefore mandate on Brexit) for the current Government would probably be seen as positive for markets; any uncertainty over the outcome could lead to volatility not just in equities, but currencies and bonds too.”
