So, the ‘snap’ General Election is over and done (that was quick). Sterling didn’t blink, the Gilt market is a shade better and stocks are little changed. Of course, this is because a Labour Party victory was widely expected and Sir Keir Starmer (along with his new Chancellor, Rachel Reeves) had worked hard to reassure (markets) in advance.

The sheer extent of the collapse of the Conservative Party was quite staggering, as can be seen in our ‘Seats’ chart opposite. I am sure that Keir Starmer was quietly disappointed not to exceed Tony Blair’s 1997 ‘landslide’ total of 418 seats, but the real story is the collapse in the Conservative’s figures (this was the lowest number of Conservative seats since 1918). They will need to work hard on compromise and sorting their differences if they are to avoid being consigned to a ‘third’ party role. I liked The Economist’s observation that the party needed a long lie-down.

In the UK, we can now return to watching for signs that the Bank of England will commence a rate-cutting cycle, looking at the chart opposite, this is probably overdue. The Europeans have started to lower their base interest rates as has Canada, and in America, the Federal Reserve continues to hold their rates but looks likely to move later in the year. Of course, this may well be complicated by the forthcoming Presidential Election, the Fed is unlikely to want to make a move too close to that for fear of appearing to be politically motivated.

European Parliamentary elections and then, particularly, the surprise French General Election have left some muddle in their wake. Now we can move in earnest to worrying about the US Presidential Election in November. I found the recent Supreme Court ruling on Presidential immunity very troubling and fell to wondering whether Richard Nixon could/would have been convicted if it had been in place in 1974 (when the Supreme Court compelled Nixon to surrender the Oval Office tapes).

Companies (and markets) crave some stability in government, and it has been clear in our conversations with companies that they welcome the clear result to the Election. The previous administration did not seem able to really grasp some of the trickier decisions, notably those affecting economic productivity and efficient capital markets, we shall see how the new administration fares.

I attended a conference in the City yesterday, which included six chief executives of listed UK companies, and I was impressed by how many had had useful and meaningful contact with the new Government. For now, I shall take this as an optimistic sign that companies will begin to invest again, something that has been sadly lacking since Brexit, and that this just might reinvigorate UK PLC.
 

The full Quarterly Review is available here. 

July 2024

Important Information

The contents of this article are for information purposes only and do not constitute advice or a personal recommendation. Investors are advised to seek professional advice before entering into any investment arrangements.

Please also note the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.