Close election battle will hurt stocks
The prospect of a close election outcome in Britain bodes ill for equities if history is anything to go by.
The prospect of a close election outcome in Britain bodes ill for equities. Market historian David Schwartz notes that there have been five elections in the past 50 years when the winner's majority was under 20 seats.
The FTSE All-Share index slid in the six months before the vote on four occasions, with an average decline of 15%. Nine other polls produced a majority of at least 20 seats. Before eight of them, shares gained an average of 15% in the prior six months.
A key question this time is whether an improving economy could bolster Labour, making a hung parliament more likely. As joblessness falls, support for a government usually grows, says David Owen of Jefferies.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But the link between a strong economy and high approval ratings is broken if the government loses a reputation for economic competence. The sheer scale of the latest fiscal crisis undermines this government's aura of competence. Unemployment is still well up on last year.
Gordon Brown would need "a much longer period of recovery" to rely on an election boost from the economy.
-
FTSE 100 hits record highs – why is it rising and will we see more gains?
Advice UK equities have been described as unloved for a long time but as the FTSE 100 hits new highs, we explain if now is the time to buy British.
By Marc Shoffman Published
-
How to invest in copper
It may be time to invest in copper as the red metal appears poised for a big jump. Dominic Frisby looks at what should investors should buy
By Dominic Frisby Published