The prospect of stability and economic growth following last week’s labour election win, could boost the UK equities market, according to investment experts.
The UK stock market has suffered from uncertainty and instability since Brexit, lagging its international peers. Despite Conservative party warnings that a Labour victory could “bankrupt every generation”, market commentators believe Labour could usher in a new era of stability for the UK and entice investors in an increasingly volatile international landscape.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The result comes on the heels of a steady rise for the UK market, retaking its crown as Europe’s most valuable for the first time in nearly two years last month. With political turmoil in France now taking centre stage, the UK looks finally set to enter into a period of financial stability which has the potential to spark renewed investor interest in UK assets.”
Alexandra Jackson at Rathbone UK Opportunities Fund, said: “The prospect of stability and economic growth in the UK should give a boost to UK business, as well as to company share prices and investor flows into our asset class.”
Ed Legget, co-manager of the Artemis Select Fund, said the election results “take away another one of the objections” for not investing in the UK.
With unemployment at low levels, a high savings rate and increased corporate confidence, Legget said the UK economy is in “better shape than many commentators have suggested.”
“The other missing part of the jigsaw is more support for UK equities from pension funds and institutional investors. The new government is committed to a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK capital markets.
“This could help reverse the relentless decline in the domestic UK equity base and in doing so reverse the relative underperformance of the UK market over the past decade.”
According to Legget, the relative political stability of the UK could see it become something of a “safe haven” for investors as other parts of the developed world move into an era of greater political uncertainty.
Labour’s commitment to increasing investment by UK pension funds in the stock market was also welcomed by Liontrust Economic Advantage team fund manager Natalie Bell, who said reform would be transformative to the capital flow dynamic in the UK market.
“A number of stars should align; a stable government, interest rates falling, inflation stabilising and growth returning. This, coupled with likely policy intervention, should help turn the tide following decades of outflows. We hope the next government recognises the opportunity to promote economic growth and domestic prosperity via a thriving stock market sooner rather than later,” Bell added.
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