Well it finally seems to have happened. People have voted to end the Brexit uncertainty and have delivered a clear Conservative majority government.
The early reaction from the markets is incredibly positive, with sterling up around 3 cents on the dollar since the results were announced last night and both the domestically focused FTSE 250 and the internationally focused FTSE 100 have posted impressive gains, the former breaking a new record today. In the case of the FTSE 100, this is especially impressive considering the significant strengthening of sterling – a factor which is usually negative for stock prices.
I have said for a long time that uncertainty is almost always worse than the outcome, even if the outcome is bad. No matter your views on Brexit, I do believe that having a conclusion to the whole issue will allow individuals, businesses and government to ‘get on’ and move things forward.
I know of many individuals and companies who have been delaying decisions around investing and hopefully this clear result will now unleash some of these held back investment funds.
Now of course things are rarely simple. The deal to take us out of the EU (which now looks very likely to be implemented on 31st January) is only the beginning and there will need to be future trade negotiations with the EU to hopefully secure a sensible, post divorce trading relationship.
Additionally, the SNP’s surge in Scotland will inevitably bring up the issue of a second referendum on independence. Although this will probably have a smaller impact on markets than Brexit, if the previous attempt is anything to go by, it could cause volatility in sterling and some short term uncertainty on the markets. I did mention at the client event a few weeks ago – I believe that political uncertainty is now the new normal.
I also feel that the Conservative victory is a victory for personal finance. Despite the Conservative manifesto essentially maintaining the status quo when it comes to personal tax and finance, that status quo, I believe, is incredibly generous. I don’t think that there is any doubt that last nights result is positive for wealth creation.
Finally, in all the election noise it was easy to miss some positive news out of the US last night with tentative signs that we might also get the start of a resolution to the US / China trade war.
All in all, Friday 13th has been lucky for markets, lucky for sterling and, lucky for the Conservatives.
The Buckingham Gate Investment Committee will be convening early next week to discuss the election results and consider if any changes need to be made to the portfolios in response. We will, as always, keep you updated on our latest thinking.