We are now just one week away from the UK general election and the market is starting to get a bit twitchy. As I mentioned in May’s monthly newsletter commentary market angst was always likely to increase as the election date drew closer. When Theresa May fired the starting pistol on the election campaign she did so in the belief that a landslide Conservative victory was fairly certain. The Labour party was seen as a wounded animal with the Conservatives circling in for the final blow.
The announcement of the general election caught the market by surprise and the pound rallied more than 4%, as they priced in the possibility of a strong majority Conservative government. The logic has been that if Theresa May is given a strong mandate, by the UK electorate, in the Brexit negotiations then a softer Brexit was more likely. A soft Brexit should mean a more positive economic outlook for the UK and the prospect of interest rate rises in the future as this becomes reality.
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