What the Brexit election means for your money

This election may be all about Brexit, but it will also define the wider political and economic environment for years to come. John Stepek looks at the issues and explains what it all could mean for you.

Jeremy Corbyn © Dan Kitwood/Getty Images
A Labour government would not be great for investors

Jeremy Corbyn © Dan Kitwood/Getty Images

I've avoided it all week. But I can deny it no longer.

It's time to turn our attention to the forthcoming election in the UK.

As my colleague Merryn points out in the latest issue of MoneyWeek, whatever the competing parties try to say, this election is all about Brexit.

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However, as she also points out, while the election itself might mostly be about Brexit, once whoever wins is in power, we have to contend with what they might do.

And that's the scary bit.

You may vote to Leave or Remain, but the winner will stay around beyond Brexit

I haven't written about the forthcoming election yet this week.

That's partly because it's just yet another news event that shouldn't have you panicking about what to do with your portfolio.

Don't get me wrong, it certainly could have a major effect on your money. But we've known for ages what the possible outcomes are, so I'm hoping that you have a handle on what you need to think about.

If not, hopefully this might help a bit.

So what does it all mean? On the Brexit front, weirdly enough, things have actually become clearer, as far as I can see.

If the Conservatives win, we get a Brexit of some sort. If the LibDems win, we get no Brexit at all. If Labour wins, despite all the chopping and changing, it looks as though we probably get a second referendum, with the government campaigning to remain.

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So purely on the Brexit front (and I say this loosely), markets should start to calm down a bit. The whole "cliff-edge" scenario (always something of a misnomer) is extremely unlikely now. You get some sort of deal, or you get no Brexit at all.

That said, there are other concerns.

First is that we might not get any clear majority at all. That probably means a lot more squabbling in the Commons, and it probably edges us closer to "second referendum" territory. Again, on the Brexit front, that just extends the pain rather than changing anything, but it introduces a lot more polarisation and a much longer period of governmental paralysis. On the one hand, gridlock isn't always bad, but on the other, I think it would greatly increase the sense of frustration at large.

The second issue is that we might get a Labour government, which despite the delusions of various multinational investment banks, would be a much more radical outcome than a no-deal Brexit.

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A confession: I'm not convinced a Labour government would be great for investors

Look, before I get into this, let me be clear about something: I believe in treating my readers like the grown-ups they are. So cards on the table, I have no illusions about my own objectivity and I'm not going to pretend to you otherwise.

I believe in capitalism and free markets they're by no means perfect, but so far they beat the alternatives. So clearly I'm not going to be a fan of a hard-left Labour government. So take my views with as many pinches of salt as you like.

That said, while I freely admit that I may have political biases, I do think I have a decent idea of what markets are comfortable with and what they are not. And one thing that they tend to prize highly is a reliable system of property rights.

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When you start playing fast and loose with that trying to pick winners and losers in industry; painting some forms of wealth as "bad" and other forms of wealth as "good"; rhetoric that makes any form of profit sound like it's been stolen rather than earned; looking at the economy as a zero-sum game rather than a system that has the potential to make us all better off then a country becomes a lot less appealing for investors and entrepreneurs.

We've written more about Labour's specific policies here in MoneyWeek magazine. But given that Jeremy Corbyn's campaign has kicked off by painting specific individuals as hate figures to be brought down, I think you need to view any manifesto policies as a mere starting point to a "war on wealth", not as something which will later be diluted (which is what the delusions of the investment banks are based upon).

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Beyond all that, what do both of the main parties agree on (I'm going to assume that the LibDems won't get an outright majority I think all but their most diehard fans would probably agree with that)?

Well, not much, except that like every other political party in the world right now, they are happy to splash the cash. If inflation is ever going to return, then the political route is probably the most obvious one in the world right now.

That's why, as always, I'd stick a bit of gold in your portfolio, just in case.

We'll have a lot more on what the election might mean for your money at the MoneyWeek Wealth Summit on 22 November. In many ways, it's fantastic timing you'll be able to get the views of some of the world's top investment, tax and wealth planning experts, at a time when you really, really, really need to be thinking seriously about all of this stuff in a way that you never have before. All told, I'm not sure you can afford to miss it. Book here forewarned is forearmed.




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