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Snap Election: what May's move means for investors

Whether the prospect of another election excites or alarms you, the prime minister's move underlines the need for balanced investments.

 
Snap Election: what May's move means for investors

Investors are divided as how to respond to the prime minister's decision to call a snap election with some looking for buying opportunities and others taking a more defensive stance.

Steven Andrew, multi-asset manager at M&G Investments, said the surprise move by Theresa May (pictured) added to global political uncertainty, with investors already grappling with the start of French presidential elections and rising tensions between the US and North Korea.

Tomorrow's vote by MPs on reversing the Fixed-Terms Parliaments Act after just one general election showed nothing in politics should be taken for granted, Andrew said.

Nevertheless, he argued that while events until polling day on 8 June were unlikely to be smooth, the longer-term investment perspective picture looked more secure and he was looking to take advantage of any stock market volatility.

'As always, we remain focused on the things we can know rather than the things we cannot. Appraising the UK investment landscape in this context suggest to us that equity assets remain attractively priced – especially in the context of a robust UK and strengthening global economy.

'With that in mind, we would look to add to our UK equity positions should political-inspired volatility offer material discounts from here,' Andrew said.

Nathan Sweeney, senior investment manager at Architas, the AXA-owned fund manager, was more cautious. He said he had slightly upped his holdings in gold, which he had added to his portfolios last year, and raised his exposure to funds not focused on the main stock market.

'We see gold as providing a level of downside protection in portfolios, which is what we are seeking at the current time,' Sweeney said.

'Alongside this we have increased our exposure to alternative assets, such as infrastructure, renewable energy and catastrophe bonds. This includes the John Laing Infrastructure (JLIF ) and John Laing Environmental Assets (JLEN ) funds,' he added. 

Justin Urquhart Stewart of Seven Investment Management said today's news underlined the importance of having a well-diversified portfolio. 'Good investment is about managing the risks of the unexpected, and here is a great example.

'The consensus view has been for a weaker pound, which would benefit the overseas heavy FTSE 100 as we headed towards a harder and harsher Brexit.

'However, just when everyone is facing one way (the consensus way), then it is usually the time to look the other way and manage the risks of exactly the opposite. This scenario could be a higher pound and a falling FTSE 100 – it seemed so unlikely, but so did the UK referendum and US presidential election results last year,' Urquhart-Stewart added.

Russ Mould, investment director at fund supermarket AJ Bell, said investors could take some reassurance from history and opinion polls, in as much as these could still be relied upon after last year's electoral upsets.   

'Analysis of general election results since the inception of the FTSE All-Share in 1962 shows that the index has tended to do better, on average, under Conservative prime ministers,' he said, referring to May's big lead in the polls.

In addition, the experience of the mid-term elections in 1966 and 1974 which returned Labour's Wilson and Callahan to government with strengthened majorities sugggested the stock market preferred a win for the incumbent, Mould said.

May said the election was needed ahead of the start of negotiations to leave the EU. She accused opposition parties of ‘game playing’ and said an election was needed to ensure stability during the talks. 

‘In recent weeks Labour has threatened to vote against the final deal to be reached with the European Union, the Liberal Democrats have said they want to grind the government to a standstill and unelected members of the House of Lords have vowed to fight us at every step.'

The prime minister needs a two-thirds majority in the House of Commons to vote in favour of the election. 

Labour leader Jeremy Corbyn backed the call for election, meaning the vote will pass through the Commons unless Labour MPs rebel against their leader.

'Labour will be offering the country an effective alternative to a government that has failed to rebuild the economy, delivered falling living standards and damaging cuts to our schools and NHS.'

David Page, senior economist at AXA Investment Managers, said May was clearly seeking to reduce the influence of Tory back-benchers pusing for a hard Brexit and a voice on other domestic issues.

However, the decision to go to the country was not without dangers for the prime minister, he said. If the election became a de facto second EU referendum, it could enable the Liberal Democrats to make large gains as the party for 'Remainers', raising the prospect of another coalition government.

Page said while many would view the election as a contest between May and Corbyn, 'nevertheless, there must be a real risk that the outcome of an 8 June election would be to make a material change to the government and hence alter the course of the proposed Brexit negotiations.'

13 comments so far. Why not have your say?

samplewriter

Apr 18, 2017 at 15:40

This election will give theresa may a much need boost .look for the tories to increase their vote with ukip making some ground their party seems to got themselves very mixed up but should increase their vote had nigel still had the office the party would do better .

Mrs may has done well and looks strong .

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Jeff Warren

Apr 18, 2017 at 16:18

Hooray this should show that ghastly woman from Glasgow that Scotland will be far better off in the Union Than floating around in a stormy North Sea

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Trevor Smith

Apr 18, 2017 at 16:53

I had a very happy six months working for BP in the early 60's

The people were very welcoming and had a good sense of humour.

I can tell you that even then London felt a very long way away.

In these highly divisive political days i can only imagine that SE England in particular must feel like a foreign country

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Trevor Smith

Apr 18, 2017 at 16:56

Apologies i should have pointed out that I lived and worked in and around Falkirk

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C Robertson

Apr 18, 2017 at 17:41

The news of the pending election is excellent. The predicted landslide for the Conservatives will provide the stability and continuity the country needs. It

will also stymie the Scot Nats who have done much to undermine the present

government. Mrs May should emphasise that a conservative win will be taken

as endorsement of her policy of no second referendum in the short term.

Scotland is better and stronger WITHOUT the Scot Nats.

LP

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Martyn

Apr 18, 2017 at 22:21

I think Brexit and the Scottish Referendum are smoke and mirrors. I think Mrs May feels she is restricted by the previous Tory Election Promise not to raise taxes as she realises that money must be raised to save the NHS and our education system. People will argue about Brexit and SNP, Tories will get a majority and then (surprise, surprise) our taxes will go up!

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Andrew Hill

Apr 19, 2017 at 08:21

Will the Tories, if re-elected, renege on the 2015 manifesto commitments on the pensions triple lock, the promise to raise the income tax threshold to £12,500 by 2020 and the guarantee not to raise income tax, VAT and NI "during the life of this parliament".

Oh. Lets not forget the cap on care home fees, delayed until 2020, at least.

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Keith Tunstall

Apr 19, 2017 at 09:52

TM will get a huge majority with less than half the country voting for her. Does that spell stability? We have a crazy electoral system.

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Andrew Stevenson

Apr 19, 2017 at 20:55

Quite right Keith, 3 million votes for the SNP and they get 56 seats. 4 million for UKIP and they get none. Hey ho

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Dorothy Bell

Apr 20, 2017 at 12:28

Mrs May has been leading in the right direction and unpicking some of Camerons mindless mistakes. She has brought greater stability with her commons sense. A vote for her will provide even more stability for the UK to flourish independently, fairly and with much needed, united strength as a great united global power for peace and prosperity. .

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xcity

Apr 20, 2017 at 18:56

@ Andrew Hill

The Tories have already kept their commitments on the pensions triple lock and the guarantee not to raise income tax, VAT and NI "during the life of this parliament" as this Parliament is about to expire. They were still on their way with the promise to raise the income tax threshold to £12,500 by 2020.

The new manifesto may be the same or different and you can vote on what it says this time.

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Jeff Warren

Apr 20, 2017 at 19:11

I only wish I were younger to get out & canvas for the Conservative Party . We need to increase our manufacturing base ,increase our income from exports to provide the revenue the country ne ads for all that needs to be done .

Blair ,Brown & regrettably Cameron have wasted so much it's a big climb to get back to w hat we are capable of, In the 72 years since I left school I have seen our industry go to waste & th e smoke of industry go up other countries chimneys. I believe Mrs May can lead the way in reversing that ,to everyones benefit including mr Corbyn

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Rich John

May 13, 2017 at 16:34

And all of the above will mean what for the stock market and which sectors should provide the best prospects for investors?!

Noted that one fund manager favoured infrastructure and renewables, and one spoke of facing the other way.

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