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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Football sweepstakes are a cinch compared to investing ahead of the UK election.
Labour commands a robust 21-point lead according to the FT’s general election poll tracker — but predictions only take you so far. In India, Narendra Modi’s Bharatiya Janata defied polls and lost its outright majority, denting runaway Indian equities in the process. Conversely, Claudia Sheinbaum’s landslide win in Mexico stirred fears of radical change and sent the peso tumbling.
There will be snakes and ladders for the major UK parties — and equities, gilts and sterling — in the run-up to July 4. Televised debates, the first of which took place on Tuesday, are one trigger. Another will come with the release of manifestos, likely between now and June 16, according to the Institute for Government.
Modern history shows the UK stock market has performed better under Conservative governments: an average 57 per cent per term versus 17 per cent for Labour, calculates AJ Bell. (The shortlived government of Liz Truss is one glaring exception.)
But extraneous factors matter. Former Labour leader Tony Blair presided over further market gains when he took the reins in 1997, but that unravelled when the dotcom bubble burst in 2000.
Big picture change is not on the agenda this time round. Policies are more centrist and the inherited debt burden precludes much fiscal flexibility.
The economic legacy, given this is a period that saw the highest inflation in decades, is fair: growth gently ticking up, inflation rates gently ticking down. The pace of interest rate cuts (likely deferred until after the election) is in any case in the hands of the BoE.
That said, no manifesto is complete without the promise of reforms and these offer the best clues for those looking to follow the (public) money.
Both parties want to boost spending on defence and the NHS. Defence stocks are already on a tear, boosted by war-fuelled demand and the mass upgrade of older kit. More public funds is good for the likes of Chemring, up 45 per cent in the past year.
As for the NHS, whatever plans and funding are prescribed will fall short; the inexorable rise of private healthcare makes this the smart bet for investors.
Labour promises to “get Britain building again”, ripping up rigid planning restrictions to clear the way for building 1.5m new homes. That is good news for housebuilders, builders’ merchants and possibly even — further down the line — estate agents.
Backpedalling on energy transition commitments notwithstanding, both parties are touting renewable power. But watch the pace: Labour concedes that “oil and gas production in the North Sea will be with us for decades to come”.
Pledges across the board should play into the hands of infrastructure operators such as Balfour Beatty. Labour wants to create a National Wealth Fund to invest in ports, gigafactories and clean steel among other kit, while its proposed GB Energy will build “clean and cheap” homegrown power.
Innovation — as much a part of pledges as reform — targets everything from nurturing biotech start-ups to burnishing financial markets.
Caveats abound. The UK stock market is an international one; less than a quarter of revenues are generated domestically. Political pledges are slippery things once the votes are in. Even when they stick, they require competent execution. Perhaps not so different from the office sweepstake after all.
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