Monday, May 15, 2017

How has the Market Performed Under Each Prime Minister Since 1970?

As the UK prepares to head to the polls on 8th June, many investors will be wondering how the outcome of the general election might affect the markets and their investments. Analysis conducted by Fidelity International of UK stock market returns since Edward Heath was elected as Prime Minister in 1970 shows that, at first glance, UK equities have tended to perform better under a Conservative government.

Cumulative returns of the UK stock market:

Source: Fidelity International, May 2017. Sourced from Data Stream. Cumulative total returns of the MSCI UK index in GBP.

While the analysis may seem to support the view that stocks and shares perform better under a Conservative government, the reality is that economic and market factors have a far bigger influence on UK equities than the political party in power. This makes it a mug’s game to base your investment strategy on who leads the UK government.

Tom Stevenson, investment director for personal investing at Fidelity International, comments:  “While many people believe that the outcome of the upcoming snap general election is a dead cert, it’s far harder for anyone to predict how the market will perform during a Prime Minister’s tenure.

While on the face of it the Conservatives appear to have delivered more impressive stock market returns than Labour in recent years, the economic and market environment has a far more important bearing on the performance of the stock market than who the current occupant of Number 10 is.

For example, while UK stocks rose by over 500 per cent under Margaret Thatcher (which some have credited to her decision to deregulate the financial markets), stocks across the globe enjoyed similar returns. Similarly, while the markets produced a negative return under Gordon Brown, this was a reflection of the financial crisis rather than Labour party policy.

For investors, the lessons are clear. Time in the market is far more important than timing the market and it is far more sensible for investors to ignore the short-term noise created by the election and instead focus on their longer-term investment goals.”

May 15, 2017 at 03:53PM

from Dylan Jones